Debt Consolidation to Bankruptcy

STEPS TO TAKE DEBT CONSOLIDATION TO BANKRUPTCY Source: Bankruptcy America REALITY CHECK 1- Have your credit cards have reached their credit limit? 2- Do you pay only the minimum or less on any of your credit cards each month? 5- Do you juggle other bills to make the minimum payments on credit cards? 4- In the last year, have you gotten a payday loan? 5- Have you been paying late fees on overdue credit or store card bills? 6- Do you use cash advances from one credit card to make payments on another? 7- Has a collection agency contacted you about an unpaid debt? 8- Have you recently received a court notice, or a letter about bailiffs or a sheriff coming to your home? START BANK If you have answered STEP YES DEBT CONSOLIDATION to any of these questions, proceed to Step One Debt consolidation is getting a single loan to replace many unsecured debts, such as credit card balances. DOI QUALIFY If you owe money on a line of credit, four credit cards, and a finance company loan, you may be able to get a debt consolidation loan to repay all of your debts, so that you only have one payment instead of six payments each month. FOR A DEBT CONSOLIDATION LOAN? EXAMPLE DEBT CONSOLIDATİON To qualify for a debt consolidation loan: You must give the bank or other lender a copy of your monthly budget. This is to prove that you have the ability to make payments. STEP 2 I DON 'T As a general rule, if you can afford to repay all of your debts over a three to five year period or less, then a DEBT CONSOLIDATION loan is probably the correct option for you. CREDIT COUNSELING You must have a stable source of income, such as employment wages. QUALIFY (proceed to Step 2) Credit counseling is a professional service from a credit counseling agency. They provide two main services: You may require a co-signor or 3 collateral (such as a car or a house). - Education on personal management of finances and credit, including credit cards. I DO If you have poor credit, a co-signor will probably be required. Asking someone to co-sign for you is a difficult decision and should not be taken lightly, as any non- payment by you will directly affect your Co-signor's credit score. QUALIFY - Debt Management Plans (DMP) (proceed to FINISH) A DMP is an arrangement made by a credit counselor between you and your creditors. You make a single monthly payment, and the counselor makes payments to the creditors, EXAMPLE I DO For example, if you owe $20,000 to five different credit card companies, ,the QUALIFY credit counselor would (proceed to FINISH) create a Debt Management Program for you wher pay the credit counselor, say, $500 per month, the money is distributed to your I DON 'T creditors, and over a 40 month period all of your debts are paid off. STEP 3 QUALIFY (proceed to Step 3) BANKRUPTCY A plan to repay some or all of the money owed over a period of time is called a Chapter 13 plan. BANKRUPTCY is a way for people who have more debts than they can handle, either to work out a plan to repay the money they owe over time, or to eliminate their debts entirely. Whichever chapter you choose, note these key facts: If payments cannot be paid over time an individual can file a bankruptcy under Chapter 7, where assets are liquidated and most debts are discharged. - Bankruptcy is complicated, with local variations in the laws. It is important to CONSULT A BANKRUPTCY LAWYER before you file. - Before you file for bankruptcy, and again before your Chapter 13 bankruptcy is finally discharged, you must obtain credit counseling from a non-profit credit counseling agency. BANKRUPTCY FINISH I00 000 000