Is Debt Consolidation better than Bankruptcy?
For many people who are drowning in debt, it can seem like bankruptcy is the best solution. It’s often sold as a way to clear out all of the debts that a person has without making a single payment. The truth is that this is often not the case.Bankruptcy is actually a complex legal process that can have consequences that can last for years. Its complexity almost requires you to hire a lawyer, often at a cost of hundreds of dollars an hour. Once the filing process begins, there are virtually no guarantees of what will happen. While laws vary form state to state, most final judgements are left up to the personal discretion of the judge. That means it is impossible to predict how much of your debt will be able to be discharged through this process.Furthermore, recent changes to bankruptcy law have made it difficult to get credit card debt discharged if you have an above average income. It’s also next to impossible to discharge student loans, alimony, child support, and tax debts. That means many people leave bankruptcy court still owing a lot of money.For these reasons, many people leave bankruptcy court feeling that the process was not what they expected. In addition to ruining your credit and costing thousands of dollars, many people are still left with debts they have to pay. In many cases, people who tried bankruptcy would have been better off if they had chosen debt consolidation.Debt consolidation does make a person pay their debt, but it won’t ruin their credit. In fact, many people have reported higher credit scores after going through the debt consolidation process. Instead of paying thousands to a lawyer, debt consolidation offers a credit counselor to work with you for free. This financial professional will work with you to form a budget and financial plan that can improve your money situation.
Debt consolidation is also completely confidential. While bankruptcy requires borrowers to buy ad space in the local paper to declare their new financial status, no one needs to know about your debt consolidation loan. You can pay off your debts without alerting the neighborhood.