According to a February 7, 2019 consumer credit release issued by the Board of Governors for the Federal Reserve System, consumer credit rose five percent in 2018. This statistic doesn’t accurately describe the personal implications of debt. When you’re behind on payments one month, interest, late fees, and other charges skyrocket. If you feel helpless in gaining control over your financial situation, it’s time to reach out to the Fayetteville debt counseling attorneys at The Law Group of Northwest Arkansas PLLC.

Our team is dedicated to helping you get out of debt through options you may not even know exist. We are experienced in the strategies that work, regardless of the reasons that put you in your current situation. To schedule a free consultation with one of our Fayetteville bankruptcy attorneys, call (479) 316-3760, or reach out through the online form.

Options for Getting Out of Debt

For most debtors, there are three alternatives for debt relief available. They include:

• Debt consolidation, in which you combine various types of debts into one lump amount;
• Debt settlement, where you attempt to negotiate an agreement to pay off your debts; and
• Bankruptcy, a court proceeding that allows you to discharge certain debts or structure a repayment plan with your creditors.

Understanding Debt Consolidation

When you consolidate, all sources of debt are collected into one lump sum that you’re obligated to pay. Instead of dealing with multiple creditors, a range of interest rates, different monthly payments, and other terms, your consolidated debt is a single financial arrangement. You will be required to pay back all amounts in full, but you will move forward with typically a lower interest rate as compared to the high rates you pay on individual accounts now. The exact structure of debt consolidation depends on the terms you and your attorney are able to negotiate with creditors.

Benefits of Debt Settlement

When you settle your debt, you work out an arrangement with creditors to lower the total amount you owe. Your financial obligation is reduced, rather than just the interest rate. The advantage is that you may be able to negotiate for a fraction of what you owe, though the agreement will depend on your unique situation. Debt settlement usually requires you to pay off the entire amount in a lump sum, or through a short-term installment plan.

Is Bankruptcy an Option?

You may be eligible to file for bankruptcy, but it’s the most extreme type of debt relief help. There are two forms of bankruptcy available to individuals:

• Chapter 7 – Known as the “discharge” bankruptcy, this proceeding allows you to completely eliminate certain debts. However, there are strict rules to qualify for Chapter 7, and you cannot discharge all financial obligations. Child support, loans procured through fraud, and most student loans are not eligible for discharge.
• Chapter 13 – Through this type of bankruptcy, you pay back your creditors over time at a reduced debt amount, lowered interest rates, or both. Once you complete the terms of your Chapter 13 repayment plan, you emerge from the process debt-free.

Effects on Your Credit Score

For the most part, your credit score will be affected any time you reduce or eliminate your debt amount. Debt settlement and consolidation usually have the least impact, as you’re still paying all or a sizeable portion of what you owe. After completing the terms of the arrangement, many individuals can improve their credit rating within a few months by following diligent financial practices.

The effect of bankruptcy is more severe. If you file for Chapter 13, the bankruptcy will remain on your credit history for seven years after completing your repayment plan. If you discharge your debts through Chapter 7 bankruptcy, the matter remains on your credit report for 10 years. However, the impact of bankruptcy on your credit scores can diminish over time, even before the derogatory mark falls off.

Credit Counseling

Regardless of which form of debt relief help is appropriate for your needs, it’s wise to think about credit counseling. In fact, you’ll be required to participate in a curriculum for bankruptcy proceedings. Counseling can help you identify mistakes or poor judgment that got you into financial trouble in the past. Your adviser may also guide you on ways to make responsible financial choices in the future, so you can avoid problems going forward.

How a Debt Counseling Attorney Can Help

A lawyer that focuses on debt counseling has the knowledge and skills to help you address debt issues, so you can work through your financial struggles. The most profound benefit for consulting with a debt counseling attorney is that you have the details you need to make informed decisions about your circumstances. Debt consolidation, debt settlement, bankruptcy, and other forms of debt relief aren’t for everyone. There are serious implications you need to understand before making a decision that will impact many areas of your life.

In addition to the big picture, a debt management lawyer can assist with legal, practical, and administrative tasks. Every case is different, but an attorney is a valuable asset for:

• Working out details and interest rates for a debt consolidation plan;
• Negotiating with creditors for debt settlement, potentially reducing the total amount you owe;
• Completing necessary paperwork on debt settlement or consolidation;
• Helping with Chapter 7 or Chapter 13 filings;
• Representing you in court throughout bankruptcy proceedings;
• Defending your interests if a creditor sues you in court on an outstanding debt; or
• Advising you on how to clean up your credit report, repair your credit, and improve your credit score.