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Would debt consolidation really work?

Easy credit. We have all seen and heard the phrase. For most people, it is easy to obtain numerous credit cards. And each one comes with an incentive to spend. Some people can soon find themselves deep in debt and in deep trouble with those credit cards. It can be due to not keeping your eye on your finances, and as your income increases, you may increase your spending, believing that you can spend more because "you can afford it."

As long as your income grows, you may be able to manage such an existence. But if you lose a job, suffer an illness or accident or suffer some other issue where your income is reduced, how would you cope? This situation can become dire if you were living paycheck to paycheck and you then have an accident or illness that both terminates your income, reduces your health care coverage and drives increased expenses.

Debt consolidation may be one way to get out of this unpleasant situation, but you need to look realistically at your income. It will only work if you have substantial income and the discipline to eliminate all unnecessary spending. To make it work, you may need to obtain less expensive vehicles or housing. But at the core, you have to have a viable income.

If you cut your expenses back to the bare minimum or if you already have, and your future income is insufficient to pay off your debt including the interest it will accumulate within five years, you should then consider filing a bankruptcy.

A Chapter 13 will last, at most, five years and will allow you both reasonable living expenses and the ability to pay your secured debts and perhaps some of your unsecured debt. It will then provide a discharge from your remaining unsecured debt, making any remaining balance uncollectible. You will have to maintain your payments on your secured debts, or you will need to surrender the property.

If you have no secured debts, a Chapter 7 can help you obtain freedom from your debts in less than six months. A bankruptcy attorney can help you determine which chapter of the bankruptcy code is best for your situation. For those who are truly desperate, a bankruptcy is likely to be the solution that will really solve your debt troubles.

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