IRVINE, CA / ACCESSWIRE / November 28, 2022 / Debt has become endemic in the United States, with total personal debt in the country surpassing $14 trillion in the first half of 2021. That works out at around $58,000 per adult, with 77% of households carrying debt of some kind. Given these figures, it is hardly surprising that many Americans struggle to pay down their dues and seek alternatives to reduce or eliminate the total of what they owe. Fortunately, there are solutions in place, such as debt consolidation and bankruptcy. "The key is to choose the path that makes the most sense for an individual," says Nick Kohlschreiber, founder of AcuFi. "Many people perceive the ‘clean slate' of bankruptcy is an easy solution, but they fail to realize what they must sacrifice in the process."
Bankruptcy comes in six forms, but the most common ones for individuals looking to claw their way out of debt are Chapter 7 (liquidation) and Chapter 13 (repayment plan). While Chapter 7 can clear unsecured debt more quickly, fewer borrowers are typically eligible based on income requirements. Individuals may also have to part with assets in order to pay off creditors or cancel out debt. Chapter 13 allows for restructuring rather than absolving debt through a payment plan approach over a span of years agreed upon. It is essential to keep in mind that bankruptcy is a legal proceeding that requires the courts to get involved regarding a resolution.
While bankruptcy can represent a viable option for many, there are quite a few downsides. For one, both types of bankruptcy can impact credit scores for anywhere from seven to 10 years, which may prevent individuals from starting afresh once their debt is resolved. Court filing and lawyer fees also add up, making it difficult for those already faced with financial challenges to pursue this avenue. Depending on which assets of value are selected for recompense, individuals may have to give up their homes, cars, and other valuable items. "People also need to keep in mind that these processes are not swift," Nick Kohlschreiber notes. "The legal proceedings can take anywhere from months to years to resolve, leaving debtors in a financial limbo in the meantime. Moreover, not all debts are eligible for bankruptcy claims."
Debt consolidation presents itself as a viable alternative for people facing insurmountable debt without the legal hurdles of a bankruptcy. This approach literally consolidates various debts into a single loan or a debt amount that is agreed upon and can be paid off over a period of time. Typically, these can be negotiated to have lower interest rates or more manageable payment options than those of the original creditor agreements. "Debt relief programs are designed to help consumers maintain their dignity while also fulfilling their obligations to creditors," Nick Kohlschreiber comments. "In most cases, these debt resolution programs settle unsecured debt (loans not backed by collateral), such as credit card, medical, and utility bills."
With debt consolidation, borrowers may experience a temporary impact on their credit score, with a long-term possibility for it to improve as debts are paid off on time. The total cost of what is owed in terms of interest may also be lowered overall, depending on what the creditors and the debt resolution representative negotiate. "Consider the fact that a debt advisor works on your behalf to help renegotiate how to pay off what you owe, whereas a bankruptcy looks to exchange credit and assets for payment plans," Nick Kohlschreiber explains. Also, while the majority of lenders will charge origination fees, most are far lower than any legal fees incurred during the bankruptcy process.
AcuFi is a company dedicated to advocating for consumers burdened with unsecured debt to help them develop viable repayment plans and strategies. It provides debt resolution services to those looking for an alternative to bankruptcy, making it possible to reduce the amounts owed and settle the debts faster. AcuFi representatives work on behalf of the consumer with experts to create personalized debt relief plans.
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