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Do I need to file bankruptcy? Can't I just consolidate my debts?

When you find yourself in a financial pickle, you tend to look at all the debt relief options that are floating around out there. With a quick Google search, you'll find a number of companies in California that offer debt consolidation or debt settlement services. You may even read a bit about bankruptcy. What is the best option for you?

You, like most people, may view bankruptcy as the worst thing that you could do, so you put it out of your mind. You focus on debt consolidation, thinking if you could just lower your monthly payments, you'll be just fine. Here is the truth about your debt relief options.

Consolidate, end up with more debt

When you consolidate your debt into one big loan, there are never any guarantees that the interest rate you get will be better than what you have. You will likely have to pay fees to transfer your debt, and you'll likely be stretching out the length of time you are paying down the debt. This means you will pay much more than your original debt amount by the time you pay off your new loan – sometimes, it is thousands more.

Debt consolidation can give a false sense of security. By lowering your monthly payments, you may feel you have extra money when, in fact, that extra money should be going to pay down your debt faster. Not many people do that, though. In other words, debt consolidation does not change habits, which can put you right back in the same position if you are not careful. If you go this route, the sooner you pay off your debt, the better.

Debt settlement

Debt settlement would be a better option than debt consolidation. You do not need to sign up with a debt settlement firm to take advantage of this option. In fact, most debt settlement firms are not able to do all that they claim. You can take the matter into your own hands and attempt to settle with your creditors yourself. If that is something you feel uncomfortable doing, an experienced bankruptcy attorney may be able to help with this.

Bankruptcy

Not everyone qualifies or needs to file for bankruptcy, but do not rule this option out without seeking information about it first. It may end up being your best option. Legal counsel can review the finer details of your economic situation and help you determine the best debt relief option for your situation.

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