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Consumer credit counseling could certainly help you get your debts under control and paid off. In fact, if you were to go to a consumer credit counseling agency, they would develop your debt management plan for you. In addition, they would present your plan to all of your creditors for approval. Assuming they did approve it, you would no longer have to pay them. Instead, you would send a check each month to the credit counseling agency and it would distribute the funds to your creditors. The upside of credit counseling is that if you stick to your debt management plan, you should be debt-free about five years. The downside is that you would have to give up all of your credit cards and learn to live on a fairly strict budget.
What is debt settlement?
Debt settlement is another good way to do debt management. Companies that specialize in debt settlement are usually able to get debts reduced by thousands of dollars to help their clients become debt free in two to four years. This is also a form of debt consolidation in that once the company has settled all your debts; you would no longer be required to pay your creditors. Instead, you would pay the debt settlement company once a month. However, there is a downside to this option, which is that debt settlement would definitely leave a black mark on your credit reports.
Does it ever make sense to declare bankruptcy?
If you are so deeply in debt that you don't believe any of these options could help then filing for a chapter 7 bankruptcy could make sense. It takes only about six months to get through a chapter 7 bankruptcy and you should be able to get an attorney to handle it for $500 or even less. If the court approves your application for a chapter 7 bankruptcy, you would see all of your unsecured debts discharged. This would include credit card debts, medical bills, personal lines of credit, and personal loans. However, not even a chapter 7 can get rid of student loan debts, child support or alimony or secured debts such as a mortgage or auto loan. A chapter 7 bankruptcy would definitely leave a black mark on your credit report that would last for as long as 10 years. You would find it very difficult to get any new credit for the first two to three years after the bankruptcy and when you were able to get credit it would come with a much higher interest rate. However, if you can't see any other possible way out of debt then declaring bankruptcy is certainly worth considering. You should also watch the following video as it discusses the two phases of a chapter 7 bankruptcy, including what your life will look like afterwards.