Finance

How To Decide What To Do – Debt Consolidation Vs Bankruptcy

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So, you have two options: consolidate your debt or go with bankruptcy. How do you choose between the two? This article seeks to clarify how both can benefit you and the drawbacks of each. Therefore, by the end of it, you should be able to ascertain which one is best for you and your current situation.

Firstly, let’s look at how debt consolidation works so you can weigh up the options and discover which is right for you.

Consolidating debts basically lumps several of your debts into one single debt that is meant to be easier to manage. You don’t have to keep track of all the details and you have a better idea of just how much you need to pay back. You also get to choose the exact time and dates to pay back the creditor instead of juggling numerous payments.

 

THE MAIN BENEFITS OF DEBT CONSOLIDATION:

 

  1. To make the repayment of the debts easier
  2. Reduce the amount you pay each moth
  3. Reduce interest rates

 

THINGS TO CONSIDER WITH DEBT CONSOLIDATION:

 

It differs from settlement as you do not pay off the lump sum which is decreased from the original amount. There is no negotiation involved but consolidation essentially lessens your creditors. Therefore, if you owe several people money, it might be best to go for consolidation.

 

WHAT ABOUT BANKRUPTCY?

 

Times may be tough and you might be considering to file for bankruptcy. The main differences from this and consolidation is that your non-exempt property will be sold to creditors to help get rid of your debt.

 

You still get to keep your exempt property of course. The repayment will be slowly paid off and any medical or credit card bills will be deleted meaning the debtor no longer has to make payments. This is a very basic explanation and there is a lot more to it but you should get a sense of the solution that is best for your needs.

 

SO, WHAT IS BEST FOR ME?

 

With bankruptcy, you also get a good amount of protection against creditors whilst wiping your slate clean. Whilst, debt consolidation isn’t as impactful on your credit score in the way that it allows you to start from a clean slate in a way.

 

However, debt consolidation does protect your reputation and credit rating whilst you seek to repay what you owe. It can be a tough decision and at the end of the day, it’s always advisable to speak to someone in the know. Talking to a financial advisor about your worries can help you work through the best option.

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