Consolidation of Debt as an Alternative to Bankruptcy in Illinois
Before you break down and decide to file for bankruptcy, you should look into and research some other alternatives to bankruptcy in Illinois. How useful these alternatives to bankruptcy in Illinois are and whether or not they are available for you depends upon the state of your employment and what assets you possess and the types of assets they are. The other alternatives to bankruptcy in Illinois will involve the consolidation of your payments into a debt consolidation loan or the consolidation of your payments through a type of service for credit counseling.
There are two kinds of loans for consolidation of debt.
- One is secured by equity contained in your home.
- One is not secured by equity contained in your home.
When you use acquire a loan for debt consolidation that is not secured using your home, the company basically loans you money and you use this money to pay off your debt. You simply make a payment each month to the company of consolidation and they use this money to handle the debt to your creditors.
This kind of loan may also enable you to lower the cost of credit and improve your circumstances financially by consolidating the debt you have through an equity line of credit on your home or a second mortgage on your home. You should think extremely carefully before you do this. This specific loan puts your home up as collateral meaning you could lose it if you fail to make your payments or if they are late.
This is extremely important to consider if you have more equity invested in your home than you can protect under the home exemption of Illinois. If you have more than you can protect, then you will have to create a payment plan under a Chapter Thirteen bankruptcy in order to keep your home or surrender it under a Chapter Seven bankruptcy. The debt consolidation as an alternative to bankruptcy in Illinois is probably better for you to look into if you are considering a Chapter Thirteen bankruptcy in order to be able to keep your home.
Consumer Credit Counseling as an Alternative to Bankruptcy in Illinois
Another alternative to bankruptcy in Illinois is consumer credit counseling. Under a plan such as this, your creditors may accept a reduction in payments and lower your interest rates. As a general rule, you make a deposit to the credit counseling service each month and the service uses this money to pay your creditors using a schedule that was created by your counselor. Sometimes, you will have to agree to not use any more credit or apply for any more credit while you are a participant in a program such as this.
If you want your plan to be successful, you must make your payments regularly and in a timely manner. It could take up to two years or even longer to complete. You can ask the credit counseling service for an estimate on how long it will take to complete your particular plan. Some services for credit counseling charge little or nothing for management of the plan while others may charge a monthly fee that could potentially add up to a significant sum given enough time. Contributions from creditors are what fund some services of credit counseling.
A plan for repayment of debt can eliminate much stress when it comes to dealing with overdue bills and creditors that seem to continually harass you. This does not mean that you can forget about all of your debt. The plan does not serve as an eraser nor does it provide for a fresh start as a Chapter Seven bankruptcy might. You yourself are still responsible for the paying of any debts that are not included within the plan and for reviewing your monthly statements to be certain that the creditors are receiving your payments when they are supposed to. You have to make sure that the creditor has lowered your interest rates or finance charges or waived any late fees if these were concessions included within your plan for repayment.
Unfortunately, a plan for repayment of debt will not erase your bad history of credit. Under the Fair Credit Reporting Act, accounts with accurate information can stay on your credit report for anywhere up to seven years while a bankruptcy will stay on your credit report for ten years. In addition to this, creditors continue to report information on any accounts handled through the repayment of debt plan. In example, a creditor may report that an account has had payments that have been missed completely or that are late or that the account is going through financial counseling. It may also report that there are concessions such as write-offs or lowering of interest rates, cancellations of late fees and such.
