Richard J. Shurtz, Attorney at Law

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Bankruptcy may be more beneficial than consolidation loan

Many residents of Washington state, like people throughout the country, are struggling with how to pay down their debt load when they don't make enough money. They didn't set out to get in that kind of a predicament but usually an unforeseen setback occurred. It may have been a medical disability, extraordinary medical expenses, unemployment or a similar unforeseen mishap. Now that the problem has built up and real difficulties of survival are being confronted, there are several steps to take, including in some instances consideration of a bankruptcy to reorder one's debt status.

Many possible modifications to one's debt accounts may help to weather the storm. Start by taking care of the necessary debt first. Do not ignore the mortgage payment in favor of a retail credit card. Where possible, get creditors to rewrite loan terms and to extend the term of the debt.  Refinancing existing loans may work but only if the new loan has a lower interest rate.

If a consolidation loan is possible, this may reorganize one's debt conveniently to allow for fewer payments at a lower overall amount. That approach works if one's credit is still unsullied and where the new interest rate and monthly payments do not turn out to be more demanding than the prior ones. That would be trading one difficult situation for a more difficult one.

Things to avoid include resorting to an equity loan or second mortgage on the house. If one preserves the equity in the home, one's chances of holding onto the home later will be improved if circumstances do not pick up quickly. Save the equity and keep building on it for later on, when the home may possibly be needed for a reverse mortgage or other retirement planning. Filing a bankruptcy to erase all unsecured debt can be a major strategy for a Washington state resident to start fresh and to plan for a new financial life going forward.

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