Bankruptcy is a legal process through which people can eliminate their debts.
There are mainly two types of bankruptcy, under chapter 7 and chapter 13.
Under chapter 7, court liquidates the assets of a person in order to pay off the debts and the remaining debts which are not paid off are eliminated.
Chapter 13 takes a different approach.
The court orders a new repayment plan under which a person would need to repay his debts within a span of 5 to 7 years.
Both these processes are time consuming and expensive.
A bankruptcy stays on the credit report for a minimum of 7 years.
Before taking this option it is advisable to try other debt relief options which do not have such negative impact on your financial future.
Credit counselling educates its customers on how to handle their debts.
They negotiate with the creditors to get a lower rate of interest for the customers.
They even try to get some of the penalties removed from the account.
This helps in bringing down the monthly payment which the customer needs to pay to the credit card company.
Consolidating ones debts makes it easier for a debtor to manage his debts.
The credit cards charge a high rate of interest hence the minimum due every month is also high.
One can take one loan with a lower interest rate to pay these debts off.
This also gives them the convenience of serving only one debt.
Taking an unsecured loan is more preferable as you will not be at the risk of losing your collateral.
If meeting the minimum payments has become a fight then you can opt for settlement of debt.
Debtors who have more than ten thousand dollars in unsecured debt are eligible for this program.