Bankruptcy VS Debt Consolidation - Which One Is Better For You?
- Author Ferlix Grant
- Published May 22, 2008
- Word count 357
Bankruptcy and debt consolidation can both remove your debt. Before choosing between bankruptcy vs debt consolidation, educate yourself on the pros and cons of each solution.
The Advantages Of Bankruptcy
Filing bankruptcy will grant you immediate but only temporary relief with the automatic stay. Debt collection by creditors are no longer allowed and annoying phone calls, repossessions, and mortgage foreclosures are all stopped temporarily.
If discharge through a Chapter 7 bankruptcy is not possible, then a repayment plan through Chapter 13 is your next alternative. A bankruptcy repayment plan will allow a debtor to payoff debts over a three- or five-year period. A Chapter 13 repayment plan is like a debt consolidation program with more restrictions.
The Negative Effects Of Bankruptcy
The biggest disadvantage of bankruptcy is the immediate impact on your credit score. You cannot remove bankruptcy from your credit report for 7-10 years.
Since bankruptcy is a federal court case, you need to give detailed financial records to the court and creditors.
On a Chapter 7 bankruptcy, a trustee will liquidate your assets and divide it equally to all your creditors. Under a Chapter 13 repayment plan, payments may be deducted from your paycheck for up to five years.
You cannot use bankruptcy again for the next eight years after the discharge of your debts.
The Advantages Of Debt Consolidation
Debt consolidation saves an individual from handling large debts from multiple creditors. It combines all your debts into a single debt management program.
Similar to bankruptcy, you can avoid harassing collection calls from debt collectors. The consolidation company will handle and negotiate with your creditors on your behalf.
The Negative Effects Of Debt Consolidation
Debt consolidation will have less of an impact on your credit score. Until you fully pay your accounts, a remark saying that you are paying by credit-counseling agency will appear on your credit report.
Choosing Between Bankruptcy Versus Debt Consolidation
There is really no simple solution to getting yourself out of debt. A Chapter 7 bankruptcy can instantly give you debt relief but at the cost of your assets and credit score. Debt consolidation is simpler with minimum effect on your credit, however it does take time.
Ferlix Grant writes for www.713DebtorBankruptcy.com Continue reading the battle of bankruptcy vs debt consolidation and make an informed decision about debt solutions. Get info where you can download FREE debt consolidation e-books.
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