Richard J. Shurtz, Attorney at Law

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Debt relief may involve weighing and choosing the best options

Debt consolidation in the state of Washington involves taking on new debt to pay off old debt. This may entail taking an equity line of credit on one's home to pay off existing credit card or other unsecured debt. Using balance transfer credit cards to pay off old debt is also a form of debt consolidation. This form of debt relief may work out for some people by lowering the interest rate and simplifying one's monthly payments.

If the loan actually comes with a higher interest rate and has unattractive repayment terms it may be counter-productive. For those with a burgeoning debt load and not enough income to make a dent in the balances due, taking on new debt may be another ticket to frustration and a higher ultimate debt burden over the long run. Where the debt is so overwhelming and so burdensome that it cannot be paid off by new refinancing, bankruptcy may turn out to be the most attractive option.

Furthermore, prior to taking out an equity line of credit one must realize that this will be written up by the lender as a second mortgage on one's home. Eating up the equity in the family residence is a dangerous course of action that could backfire and leave the real estate hopelessly drowning in liens when retirement time comes along. When the debt is overwhelming, it is recommended that a Chapter 7 bankruptcy be considered.

Chapter 7 is open to an individual or married couple who do not exceed the income limits for their geographical area. If qualified, this form of powerful debt relief eliminates all credit card debt, medical bills and unsecured loans of all kinds, with the notable exception generally of student loans. Erasing large amounts of unsecured debt without making payments can preserve one's home for retirement purposes, and for some people, the use of a reverse mortgage in later years. In any event, the legal standards are complex; they should be worked out with the guidance of an experienced consumer bankruptcy attorney practicing in Washington state.

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