Article
Index
A
Comparison Of Debt
Elimination, Debt Consolidation & Bankruptcy
This article
provides a brief comparison of debt elimination, debt
consolidation and declaring bankruptcy so you understand the
differences between each of these forms of debt reduction.
Debt
Elimination
Debt Elimination utilizes consumer
protection laws under the Fair Debt Collection Practices Act.
This forces debt collectors to write off your unsecured debt and
to stop contacting you in the future in relation to it. This
process is entirely legal due to the fact you have not signed a
contract with the third party debt collection agency so you are
not require to repay them by law. This process removes your debt
completely.
Debt
Consolidation
Debt consolidation
combines all your existing unsecured debt into one new loan. The
debt consolidation company your working with negotiates a lower
repayment schedule with your existing creditors (or pays off
your debt completely) reducing your interest and repayment rates
substantially. This allows them to create a new lower interest
rate loan "overall" which is what you are then
required to pay off. This process is very similar to refinancing
using Home Equity Loans.
Declaring
Bankruptcy
Declaring
bankruptcy means you are effectively defaulting on all your
existing debt (both secured and non-secured) which will be
written off. However you will be required to liquidate your valuable
assets (home, car, etc) to help repay some of the creditors you
owe money to. Declaring bankruptcy will also destroy your credit
rating entirely and it can take many years to re-establish it.
Many people never actually recover from declaring bankruptcy.