Bankruptcy vs Credit Counselling
Everyone knows that in today’s society it’s an all too common occurrence that the high cost of living can result in not having enough money to meet your basic daily needs. With the price of everything going up (except your wages) it’s easier to fall into a never-ending cycle of debt. Even as you try to make your minimum payments, your debt just keeps getting higher and higher until you’re at the point where you see no other way out except to file for bankruptcy. Despite what people say, bankruptcy is not the easy way out, it is not the best way to start a debt free life, and it is not your only option.
While the concept of bankruptcy makes sense, not a lot of people know the consequences that inevitably follow or that credit counselling might be a better solution for them.
Bankruptcy has a negative impact on your credit score that lasts for seven years. Your credit score is the golden number that makes or breaks a potential lender deciding if you qualify for their products and what rates you’ll get.
If you’re considering bankruptcy, it is important to understand that it doesn’t cover all your debts. You are still responsible for the following:
- Student loans that have not reached 10 years of age
- Child & Spousal Payments
- Fines & Court Payments
Debts that will be included in your bankruptcy filing are:
- Credit card balances, unsecured loans, utility bills, insurance bills, medical bills and payday loans.
When filing for bankruptcy, all your assets get evaluated to see if they have any value. For the most part if you own a home and file for bankruptcy you will not be able to keep your home. If your home has a lot of equity in it then it will be taken to help pay off your debt after filing for bankruptcy. While there are some things that are exempt from seizure: retirement savings, animals, furniture, etc, if the thought of losing your assets is something that creates a lot of stress, you should consult a credit counsellor to determine if Credit Counselling will be more suitable for your needs then bankruptcy.
Credit Counselling is a process that is used to help individual debtors with debt settlement through education, budgeting, and the use of a variety of tools to help eliminate debt. Credit counselling is a great option for those who do not want to lose their processions and would like to keep or improve their credit score. Credit counselling is designed to help people make one lump sum payments to their creditors instead of smaller payments.
When entering a debt management program with a credit counsellor, it is highly recommended that you not accrue any additional unsecured debt. If you are considering applying for another form of credit, consult your credit counsellor in advance. A credit counsellor has your best interests in mind and will always check in with you to see if your financial situation has changed and if they can be of more assistance. They will also contact you if there are any changes within your program and when you are finished the program and officially debt free!
Debt management programs will affect your credit rating for 3 years from the completion of your proposal. Your creditors, not the credit counselling company, may add to your credit file that you are participating in a debt management program.
If you would like to find out if credit counselling is right for you before filing for bankruptcy a credit counselling company such as @ease Credit Management Solutions ( www.ateasehelps.ca ) will be able to help you discover the best option to managing your debt. They will also educate you on the best ways to spend money you earn afterwards, to ensure you stay debt free.