Does Debt Consolidation Affect Credit Adversely?

When people fail to manage several debts and are stressed out with their debt load, debt consolidation is the right option. It is a debt relief process, where you can amalgamate several debts into an single debt, with a lowered monthly payments and rates of interest. However, whether debt consolidation affects the credit report depends upon certain factor. Negotiating with the creditors is one of them. If you bargain with your creditors in order to reduce the actual amount, it will add adverse effects to your credit score. However, this is a rare case and debt consolidation is always bear a positive effect on the credit report.

As per the rules of the Fair Isaac Corporation (FICO), the process of debt consolidation do not affect the credit score. This is because, the process enables you to condense all existing debts into one single debt instead of including or excluding any dues. 

Debt Consolidation can repair credit score

When you put effort to lower the interest rate of your overwhelming debts, it removes your debts rapidly. Consolidating debts helps in balancing your debt and credit ratio which further promotes your credit score.

However, if the debt consolidation program involves some debt management plans, this might prevent you from availing loans from the lenders. This is because the lenders might consider you as inefficient in your financial life which might get reflected in you credit report. Furthermore, you must also note that if you gather all your debts into a single account and all of a sudden close the account before paying off your the debts, this might also hamper your credit score.

If you enroll with a debt consolidation company to eradicate your debts, you must always be careful that the payment to the creditors is not delayed. Sometimes the companies deliberately hold the payment in order to lower the rate of interest by negotiating well. You just need to take care that the payment is not delayed for a long time.

Debt Relief Advice for Businessperson

When a businessperson realizes that he is losing more money than making profit, then he must consider taking up business debt relief program. They put a lot of effort in order to build their business and take it to the horizon. While doing this, they sometimes confront a lot of troubles related to finance which might occur due to mismanagement of business funds, taking loans, health problems. These problems can even lead you to file bankruptcy. If you are facing such turmoil in your business, debt relief program is a better option to avoid the hassles of bankruptcy and get rid of you debts rapidly.

Get out of business debts

If a business is undergoing an unstable condition with huge amount of debts, it is advisable to concern the debt relief professionals. As soon as you enroll with them, they would begin with analyzing the financial status of your business. They would try to mitigate the loses by assigning a certain amount of money to each department of the business. They would also offer you some plans to manage your finance. This would help you to cope up with the situation.

The principle aim of the debt relief program is to reduce your business debts mainly by debt consolidation. By consolidation, you would merge all your debts into one and pay them off taking one loan. The debt relief company would negotiate with the creditors to lower the interest amount. Moreover, they offer effective advices to prevent your business from accumulating debts further. It is also advisable that you review your financial budget with utmost care so that you can amend any defect you come across. This will enable you to chalk out the amount you can afford to pay towards resolving your debts, thereby obtaining smooth self as well as business financial status.

Can Bankruptcy Remove Tax Debts?

Tax returns are very vital payments that the US citizens are deemed to pay annually. You must keep on paying that tax regularly. Defaulting on this can engender you to dire consequences of huge debt muddles. At this juncture, you might often feel helpless and stressed out and fail to to act rationally to remove your debts. If you are confronting such a situation, instead of being perplexed, you must be patient and look out for all the possible avenues for recovery. One of the effective option is to file bankruptcy which can help you to release your debts.

However before you attempt to file for bankruptcy, you must have a detail knowledge regarding the types of bankruptcy.

Filing Bankruptcy to clear tax debts

Chapter 7 Bankruptcy

The chapter 7 Bankruptcy refers to “liquidation”, which means the court seizes the nonexempt property of the debtor to recover the debt amount and pay off to the creditors. Taxes are considered as priority debts which is generally non-dischargeable in case of bankruptcy. However, if you owe the tax debts for more than three to four years, and you have already filed a tax return for it, you can discharge the debts like an unsecured debt. To be eligible for the chapter 7 bankruptcy, your income level should be below the median income of the state in the given tax year.

Chapter 13 Bankruptcy

In case you are ineligible for the chapter 7 bankruptcy, you have another alternative of chapter 13 bankruptcy. This will halp you to eadicate your unsecured debts within five years. While you are making payments to remove your debts, the IRS may not attempt to embellish your earnings for collecting heir money. The chapter 13 bankruptcy is a wise option if you wish to pay of debts taking up a repayment plan.

Sometimes the debtors opt for debt settlements to avoid the hassles of bankruptcy. In rder to do this, you must visit a bankruptcy lawyer to know the pros and cons of both filing bankruptcy and settling your debts, before you actually file for bankruptcy. However, if you have not paid your income tax returns properly and has been traced for thet, then debts on these returns could not be paid in bankruptcy.