Should I Choose Bankruptcy or Debt Consolidation?
Today’s society has easy access to credit, and that credit can get out of hand and bury you in debt that you can not repay. If you are to a point where the bills far outbalance the money coming in per month, it is time to consider your options. Those options involve filing for bankruptcy and turning to debt consolidation.
Both of these options have various aspects that can be different for different people. Therefore, there is no blanket ideal route to take for anyone. It is best to consider the options carefully to find the best options for you and handling debt.
When Debt Consolidation Is a Better Choice
Debt consolidation is a great route before you start filing for bankruptcy. The intent of debt consolidation is to work with all your creditors and create a single payment each month that goes toward all the bills you currently owe. Usually, this is done by working with a company that specializes in debt consolidation.
Debt consolidation can be a better option if:
- You have a manageable amount of debt that you can pay off in a few years.
- You have a good credit score that qualifies you for a low-interest consolidation loan.
- You are willing to negotiate a plan that you can afford with creditors
- You have a stable income that allows you to pay off your debts while still having additional money for savings or an emergency fund.
- You are disciplined enough to not rack up debt again
It should also be noted that certain types of debt are not eligible for consolidation through companies like this. So consider carefully what your debt is, what you're eligible for, and whether it is the best route for you and your specific debts and future plans.
When Bankruptcy Is a Better Option
Bankruptcy can be a better choice than debt consolidation if:
- You have exhausted all of your debt relief options and need legal protections through bankruptcy
- Your home is at risk of foreclosure and you want to use bankruptcy to catch up on payments
- You are unable to afford debt settlement payments
- You have so much debt that it could take you more than 5 years to repay it
How Do I Know What’s Best for Me?
Since there is a lot more to each of these options than mentioned above, it is a good idea to consult a legal professional if you are still unsure which option is best for you. The lawyers at SM Law Group have extensive experience in dealing with debt and determining the best option for your specific situation. They can help you consider factors you may have ignored while determining the best option for you. They can also help you find a reputable debt consolidation company if that is the route you choose to take.