Debt consolidation is a popular option for anyone who has a lot of credit card debt and wants to pay off their debts without filing for bankruptcy, but it’s not an option for everyone. Some people will fare better when they file for bankruptcy, and others will have the best experience if they consolidate their debt.
How do you choose between debt consolidation and bankruptcy? The choice might come down to the type of debts you have and what you want to accomplish in the future as you rebuild your financial health.
The Positive Aspects of Debt Consolidation
If you can obtain a debt consolidation loan where the interest rate is better than what you currently have on any of your credit cards, you might fare best with the loan. Some of the helpful aspects of debt consolidation include:
- One monthly payment for all debts
- Swifter payoff for current debts
- Lower interest rates and money saved
- Cessation of collection calls on overdue debts
One of the best parts of debt consolidation loans is that they can reduce the number of late fees and added charges that you might experience if you try to pay everything off on your own. Even if you think you can chip away at your debt over time, you might pay a significantly higher overall amount on your debts because of high interest rates and various fees.
The Cons of Debt Consolidation
One of the biggest problems consumers have with debt consolidation loans is that they tend to require a solid credit score. If you’re looking at debt collectors harassing you and late fees piling up on your credit cards, you probably don’t have a terrific credit score. It can be tough to qualify for a loan with a low interest rate for your debt consolidation if you can’t maintain a good credit score.
If you’re facing an overwhelming amount of debt that you don’t feel like you’ll be able to pay off, your best bet might be to speak with a lawyer about bankruptcy. You have a few options with bankruptcy, but it is considered one of the toughest options when you’re facing mounting debt. Bankruptcy isn’t easy, but it can act as a lifesaver for some families, particularly if they own a home.
The Positive Features of Bankruptcy
If you have a certain type of debt, bankruptcy might be the best option for you. Saving a home from foreclosure is one of the best reasons to file for bankruptcy, and it’s also the best way to get a fresh start with debt repayments (with Chapter 13 bankruptcy) or liquidation (with Chapter 7 bankruptcy).
As long as the debts you’re unable to pay aren’t student loan debts, bankruptcy might be one of the best options for eliminating your debts. Your assets and your current employment status will usually impact whether your judge recommends you file for Chapter 7 bankruptcy or recommends you file for Chapter 13 bankruptcy.
Although your credit score will take a severe beating when you file for bankruptcy, it’s actually one of the best ways to recover a good score over time. If you have unpaid debts, overdue bills, and mounting late fees, you might never be able to rebuild your credit score. Bankruptcy can eliminate the overdue bills and stop the late fees, so you can settle your debts and enjoy a better credit rating in the future.
Are You Trying to Decide Between Bankruptcy and Debt Consolidation?
Would you like assistance from an experienced legal bankruptcy professional? Contact Suburban Legal Group for assistance with all matters relating to bankruptcy. A consultation is the first step in figuring out whether bankruptcy is right for you and your family.
DISCLAIMER: All information on this website is provided for informational purposes only and is not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.