There are options for people who have debt that seem impossible. Sadly, some people and organizations offer debt relief options solely intended to take advantage of you. Does this apply to every debt relief option? Absolutely not. But proceeding cautiously and slowly with anyone who offers a means to alleviate your debt burden can pay dividends. 

This is another reason why speaking with a bankruptcy attorney can be a safe and risk-free proposition. 

However, you may not be at the point where you need debt relief or bankruptcy. Take these under solid consideration if your unsecured loans exceed more than half of your gross income. Or if you don’t see how you repay these debts in less than five years.  

Unsecured debt comes without an asset. For example, car loans or mortgages are forms of secured debt. If you don’t pay, the creditor can take the car or the house—and that’s why they are secured loans. Unsecured loans are things such as credit card debt and medical bills. 

Guiding Principles

Part of what makes being in debt so challenging and frustrating is your inability to pay all of it at once. You will be in a position where you have to choose between which bill to pay. When this happens, put your money into the payments connected with secured debt. You don’t want to lose your car or home. 

Not only do you likely need your car to work, but you risk losing an asset of significant value. Another quick fix that may seem appealing is to borrow against the equity in your home. During competitive housing markets, the value of your home may escalate quickly. 

Why is this a potentially risky idea? Because if you take that loan, it is now secured debt. If you use it to pay off a credit card, you are wiping out unsecured debt. However, you just borrowed more money. If you end up declaring bankruptcy, it will likely not eliminate secured debt. You fixed a problem in the short term that may lead to more significant financial issues in the future. 

Hedtke Law Group

Working through debt issues is an extraordinarily stressful task. The Hedtke Law Group proudly stands as the only law firm to offer credit reconstruction in the Inland Empire. We want to protect our clients for the long term. To schedule a free evaluation, contact us today.