Debt Management Myths

It is no secret that many millions of Americans are being affected by their unsecured debt in the wake of the latest credit crunch. Solutions are a hot topic of discussion due to the increased demand for these types of debt consolidation services, and consumers are certain to listen to many strategies from well-meaning family, friends and acquaintances on the subject. The sad thing is that a number of debt management myths continue to go on, and some of the generally repeated are:

1. “Make use of your low-interest HELOC to pay off your high-interest credit card balance.” Switching your unprotected debt (credit cards) into secured debt (HELOC) changes the stakes definitely. In the event you skip your installments, consequently you will have your home at risk, not just your credit.
2. “Acquire a debt consolidation loan.” Getting loans nowadays may appear far more complicated than it used to be, especially for people who have a lot of debt. The banks have stiffened their lending standards and from now on made these kinds of loans a rarity.
3. “Just file bankruptcy and start from scratch.” The bankruptcy reforms that came about in 2005 cause it to be more troublesome to be eligible for a “clean slate” Chapter 7 bankruptcy. There’s new 2-part means test and many consumers are now being pushed into a Chapter 13 bankruptcy accompanied by a court-structured repayment plan.