Baltimore, Maryland, has struggled over recent decades to maintain a viable industrial base in a rapidly shifting economy. The once-thriving city, home to major industry and strong manufacturing for the first half of the 20th century, has been hit particularly hard by the deindustrialization and consequent gutting of urban areas that has affected so many cities throughout the U.S.
Today, Baltimore faces a somewhat bleak economic picture. With 37% of children and a quarter of all its residents living in poverty, Baltimoreans have been disproportionately affected by the move of the broader U.S. economy away from industrial and manufacturing jobs and towards a service-based economy.
Baltimore’s relatively low unemployment rate belies its extremely high rate of non-participation in the labor force and government dependence. And the rates of bankruptcy in Maryland are relatively high, ranking it as the 15th highest state for Chapter 7 cases. All this adds up to a fairly dismal economic picture for a city that continues fighting for a better future.
But, for Baltimore residents who have fallen into financial distress, there are often better options than throwing in the towel and declaring Chapter 7 bankruptcy. In fact, Chapter 7 should generally be avoided to the greatest extent possible. Often times, debt consolidation provides a much cleaner and more desirable route to getting out from crushing debt.
Chapter 7, a cure that’s often worse than the disease
One option that people who enter into unmanageable debt have is to petition the court for Chapter 7 bankruptcy protection. While Maryland has generally favorable bankruptcy laws, often allowing the petitioner to keep their primary residence and even their main vehicles, it should be an option of absolute last resort.
Once Chapter 7 is declared, the debtor’s financial options will be much reduced for at least seven to ten years from the date of filing. There is almost no chance that someone who has gone through Chapter 7 will be able to get a mortgage, a car loan or any job requiring even minimal security clearance. Additionally, employers are allowed, by law, to ask applicants for jobs whether they have ever gone through bankruptcy. Although it’s not widely advertised, many human resource departments view a bankruptcy as a major black mark on a job applicant’s history, and many government positions involving sensitive areas simply will not hire people who have welched on debts.
On top of this, anyone who’s declared bankruptcy can forget about credit cards, business loans or any other form of unsecured debt for seven to ten years. Even after this period, they will often find getting any kind of loan to be much harder than before.
Who can benefit from debt consolidation?
Debt consolidation, on the other hand, can potentially avoid all of the negative outcomes of bankruptcy, maintaining the debtor’s credit rating at a high level and allowing them to continue their preferred lifestyle without interruption.
One of the most serious criticisms of debt consolidation is that it doesn’t address the underlying problems which led to the debt accumulation in the first place. If someone is considering debt consolidation, they should seek advice from a financial counselor and make an effort to get on a written budget and address any income or cash flow problems and any uncontrolled spending which may have originally led to the debt.
Also, debt consolidation is normally used only for unsecured, private debt, that is, debt which is not backed by collateral and which is issued or held by someone other than the government. Debt consolidation is typically not used for reducing mortgages, car loans or other collateral-backed obligations. Debt consolidation is never used to reduce or eliminate government-held debt such as child support, alimony, back taxes or student loans. Beware of any company that offers to get rid of such debt, as non-payment can result in criminal charges.
People who can benefit from debt consolidation, generally speaking, are those with unsecured debt who have addressed any spending issues or cash flow problems, are on a written budget and have a well-thought-out game plan to exit and stay out of debt. For these people, consolidating debts can lead to tens of thousands of dollars in savings, help to avoid bankruptcy and hasten their exit from debt while allowing them to stay debt free. For such people, consolidation can be a fantastic tool to better their situation.