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Bankruptcy and debt consolidation

New Jersey residents with high bills from multiple sources may sometimes consider debt consolidation as an option. FICO data on consumers with high credit scores suggests that such individuals typically have $8,500 or less in debt not related to mortgages and tend to use seven percent of available credit lines on their credit cards. Debt consolidation is sometimes considered when credit card debt runs high and is spread out over multiple issuers. While consolidation can sometimes help reduce debt, judicious use is necessary in order to raise or maintain credit scores.

A common means of dealing with debt from multiple sources is the taking out of a consolidation loan. Though the taking out of any loan can cause a temporary drop in credit scores, long-term effects tend to be beneficial for credit scores. One of the most effective uses of an installment loan is to pay off credit cards that are close to their limits. In addition, paying off an installment loan with regular, on-time payments can help improve credit scores.

A slightly different payment plan can be found in a debt management plan. These plans are open to people of all credit ratings. These plans are run through credit counseling agencies. They do usually require closure of most or all credit card accounts, and this can adversely affect credit scores. Transferring debt from cards bearing high interest rates to lower-rate cards can sometimes be a viable option for dealing with debt.

There are many forms of debt relief, but debt management and consolidation can sometimes be difficult. An attorney with experience in bankruptcy law may be able to provide counsel to a client who is burdened by high credit card obligations.

Source: Money MSN, “Will debt consolidation help or hurt my credit?“, Gerri Detweiler, January 27, 2014

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