If you are struggling to pay your bills, it may be a good idea to look into bankruptcy. Generally speaking, this is the best option for someone who spends more than 50 percent of their income towards bills and won't pay off their balances within five years. Before filing for bankruptcy, you should talk to a lawyer or financial adviser to look over all of your options.
Chapter 7 protection allows you to liquidate nonexempt assets and use the money to pay off creditors. Chapter 13 protection will enable you to reorganize debts and pay them off over three or five years. Chapter 11 bankruptcy is for those who have too much debt to qualify for Chapter 13 bankruptcy.
If you have good credit, it may be possible to consolidate or transfer balances. For instance, you could use a personal loan to consolidate credit card debt at a lower interest rate. By transferring a credit card balance to a new card, you could take advantage of a 0 percent introductory rate.
Depending on your current debt levels, these moves could save you hundreds or thousands of dollars per month. As a general rule, you may want to hold off on bankruptcy if you have good credit because it can lower your score by 200 points or more. Conversely, if you don't have good credit, filing for bankruptcy may be ideal because it could increase your score.
Bankruptcy can be an effective way to deal with debt. However, it also comes with severe consequences. Therefore, you want to be sure that you have no other options to deal with your debt before you decide to file. Once you do, it will stay on your credit report for up to 10 years.
If you need help paying off your bills, become a member of First Alliance Credit Union. You can get a debt consolidation loan that will make paying your bills more efficient and potentially save money on interest, or you can talk with a member experience advisor about your situation and get personalized help to come up with a solution that works for you.