Credit card debt consolidation options

Michigan consumers who are struggling with credit card debt might wonder what options are available for consolidating those obligations. The first thing a person in this situation should consider is whether it is possible to pay off the debt in three to five years and if the debt is less than half the person’s income.

If either of these is untrue, then the debt may be too high and bankruptcy may be a better option. In a Chapter 13 bankruptcy, five years is the maximum amount of time of a repayment plan while in Chapter 7, all eligible debts are wiped out. Other options might be transferring debt to a zero percent balance credit card or taking out a debt consolidation loan with a lower interest rate.

If none of these options are feasible, then a home equity loan or line of credit may be the right choice. Advantages are that interest rates are usually lower on home equity loans and that interest on a home equity loan is usually tax deductible. Disadvantages include the risk of foreclosure and the potential length of repayment terms. A drop in home value could leave a homeowner owing more than the home is worth. A HELOC is another possibility although it has these disadvantages as well.

An attorney may be able to review debt relief options for people including bankruptcy. One advantage of talking to an attorney is that the attorney may be able to refute some common misconceptions about bankruptcy. For example, some people may believe that they will lose all their assets in a bankruptcy. However, a Chapter 13 bankruptcy allows people to keep many assets while paying off creditors, and even a Chapter 7 bankruptcy allows for certain exemptions.