In today’s financial landscape, with rising prices and a higher cost of living, Americans are assuming more debt than ever before. Managing that debt can be a daunting task. Two common methods for addressing serious debt are debt consolidation and bankruptcy. Each approach has pros and cons, but if you’re on this page, it may be too late for a debt consolidator to help. In this article, the Indiana bankruptcy attorney, Chris Arrington, will discuss the pros and cons of debt consolidation versus bankruptcy.
Understanding Debt Consolidation
Debt consolidation is an option that involves combining multiple debts into a single loan or payment plan. Instead of making multiple payments on different accounts, you consolidate the debt into one account and make payments on that. Hopefully, you have secured a lower interest rate in the process.
Debt consolidation offers several advantages. These include:
- Simplified payments – You combine multiple debts into a single loan, reducing the overall number of monthly payments.
- Lower interest rates – Debt consolidation loans often offer lower interest rates than what you are currently paying on your credit cards or personal loans.
- Improve your credit score – Making consistent payments on your debt consolidation loan can positively impact your credit score over time.
The major drawback to a debt consolidation loan is that they are seldom offered to those who really need it and, in many cases, will not be offered to those who are in substantial debt. If your payments to creditors are currently out of control, a debt consolidation loan may not be the best avenue.
Understanding Bankruptcy
For those with more advanced debt relief needs, bankruptcy is likely the only option. Creditors may not feel as though you can make the payment on the consolidation loan. In some cases, they extend the term of the loan, so it actually ends up costing you more money. Bankruptcy is an option for those with debt management problems that are out of control.
Bankruptcy is a legal process that provides relief for individuals or businesses that are unable to repay their debts. Depending on what chapter of bankruptcy you file under, bankruptcy can discharge your debts or create a repayment plan under the protection of the bankruptcy court.
Bankruptcy offers a way for those overwhelmed by debt to get a fresh start financially. In Chapter 7 bankruptcy, you can completely discharge (or wipe out) your debt.
The largest benefit of bankruptcy is that it provides immediate relief from creditors to stop debt collection efforts, wage garnishments, and foreclosures. In a Chapter 7 bankruptcy, your debts are completely wiped out after the process is complete.
The biggest drawback of bankruptcy is that it impacts your credit score. Nonetheless, if you are facing substantial debt, it is likely that your credit score isn’t that good to begin with.
Talk to an Indiana Chapter 7 Bankruptcy Lawyer Today
Chris Arrington represents the interests of those with unmanageable debt who are considering filing for bankruptcy. Call our office today to schedule an appointment, and we can begin discussing your next steps right away.