Consolidating debt without bankruptcy

Here’s the difference: With a DMP, you’re not opening a new line of credit.The counselor works with your lenders to make it easier for you to pay back the loans you already have.Harzog recommends you start with the National Foundation for Credit Counseling (NFCC) to find an accredited credit counseling agency.

Because the debt consolidation loan was used to pay off your student loans, the new loan will be considered “educational debt” and fall under the strict bankruptcy rules that state that you can’t discharge educational loans unless you can prove that paying them will cause undue hardship.

Mixed Use Loans Some debt consolidation loans are used to pay off both student loans and other unsecured debt such as a credit card.

The pros and cons of debt settlement and debt consolidation vary, especially with regard to the amount of time it will take to eliminate debts and the impact it will have on your credit score. When used properly, either can help you get out of debt sooner and save money. The prospect of paying less than you owe — far less in some cases — makes debt settlement an enticing choice for eliminating debt.

It is also a risky one, a debt relief option so fraught with misunderstanding and negatives that most financial experts would recommend it only as a last resort. You, or a representative negotiating for you, make an offer to your creditor to settle the debt for less than what is owed.

In other words, we’re not making enough money to cover the expenses we take on.