Debt Consolidation
What is debt consolidation?
Debt consolidation is a plan to lower the interest rate and lower the monthly credit card bills by combining them into a single payment.
What is filing for bankruptcy?
After analyzing your debts and monthly income you may conclude that even after lowering your interest rates and your monthly payments, you are still not able to pay for what you owe. If this is your situation is similar, filing for bankruptcy might be the only feasible option for you
The difference between filing for bankruptcy & debt consolidation
Debt consolidation could be a good option if it offers a clear path or destination to financial stability. If you fell into debt for a specific reason, like an electric bill or medical bill, or you lacked financial discipline that you are now committed to maintaining and stabilizing, consolidation can be a good alternative. Consolidating your debts and paying them on time can improve your credit score in a relatively short time.
By contrast, if you are unable to change the spending habits that landed you in debt, a consolidation plan is very unlikely to help and can make your situation worse.
Bankruptcy could be a better option if a consolidation plan is unlikely to free you from debt in five years or is unavailable because your finances don’t allow you to pass the means test.
Bankruptcy eliminates debts, but can put a strain on your credit history for 7-to-10 years. It can protect valued assets like your home or vehicle, but only if you stick to a spending plan. Also, bankruptcy isn’t available to everyone. Chapter 13 sets a limit on how large your debts can be and requires that you have a regular income. Chapter 7 demands that your monthly income is less than the median for a family of your size in your state.
Since the considerations are complicated and complex, it might be best to meet with a debt consolidation specialist like a bankruptcy attorney to review your situation and weigh the alternatives.
Who knew Bankruptcy and debt consolidation were so comprehensive
Getting advice from a financial professional is crucial and important when choosing between what is best for your debt consolidation or filing for bankruptcy. As your financial situation is unique and it depends on many other factors. For help in coming out of this situation, you can contact the credit counselors at American Consumer Credit Counseling (ACCC)
Each of these options are very effective in different situations and you should carefully review your situation and decide whether debt consolidation or bankruptcy are right for you.