If you feel that you are living through a financial "worst case scenario" you may be asking yourself, "Can't I just walk away from this mountain of debt?". The answer in most circumstances is yes, but you need to decide which way to go. Sure, you could hand over your house and cars to the banks. You absolutely could hire a lawyer and declare bankruptcy. What most people don't realize is that most of the time you could kiss away most of your debt and quickly find yourself with better credit than you started with and none of the social stigma or harassment you've been fearing or experiencing.
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The most important step in decided to cast off debt is to determine whether you have any acceptable alternative. It is never a good thing to let an obligation go into default but it may be your only choice. If you are bringing in $4000 a month and your monthly expenses are $5000 something has to give. Obviously the first thing to go must be luxuries but kids need to be fed before the banks. If you default on your mortgage you will loose your house, if you don't pay your auto loans you will loose your car. You have to decide what debts you can live without and then decide how much unsecured debt you have to work with.
All unsecured debt is not the same. If an item is already in "late" status you have to determine if you can afford to bring it current. For example: if you need to send $500 to bring a credit card current will you have to make your mortgage late to pay it? If so, that debt may be "terminal", in that, the only way to save it is to damage a healthy part of your credit picture. This is the debt you want to shed.
The first thing you need to do is patiently let these "terminal" debts go into collections. Once an account goes to collections you can take steps to stop the nuisance calls and start to remove these items from your credit report. By requesting proof of this debt from the collectors and disputing them with the credit bureaus you can effectively remove bad credit items from your reports in 3 - 6 months. Your credit scores will crash as these debts go into default and collections and you will hear a lot of false threats so gird for the worst. If you aren't a tenacious, thick-skinned negotiator, you might be best served hiring a professional service who will stop the calls immediately and handle all the work for you. Generally their fees amount to a fraction of the debts that you are avoiding so it's worth looking into.
If this sounds a lot like a Chapter 7 Bankruptcy, you are right regarding the positives: this will allow you the breathing space you need to get your life back together and protect your home and family. However you get to avoid all the negatives of a bankruptcy: the thousands of dollars in lawyer fees, the social embarrassment and most importantly the devastating lifetime stigma on your credit scores which will cost you dearly in credit, rental worthiness, even career opportunities. You are basically giving yourself a bankruptcy without the drawbacks.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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