Should You File Bankruptcy or Consider Debt Consolidation?
For people who are struggling under debt it may be difficult to uncover the best way to get out of the mess. There are two popular options for people with debt, consolidating their debt and bankruptcy.
Debt consolidation lets people who are loaded with a lot of debt combine it all into one monthly payment. If your creditors agree to this then your payment plan will be arranged so you can afford it and so your creditors are getting a minimal amount each month. It depends on how your debt consolidation plan is structured, but some of your creditors may agree to stop interest charges and penalty fees. The problem is if you use a debt consolidation company you'll have to pay for this service which is just adding more debt.
With a Chapter 7 bankruptcy you need to pass certain qualifications before you're allowed to file, if you have non-exempt assets they may be seized to repay your debts and other unsecured debts will be discharged. The bankruptcy option gives you the opportunity to start over financially but you will affect your credit rating, although you've probably already taken a hit by being delinquent in your debts.
There is a sort of compromise, a Chapter 13 bankruptcy lets you repay some of your debts so you can keep your car and home and other items, it may take some assets to pay off other debts, and then some of your debts will be excused. Typically a Chapter 13 payment plan runs for three years but it may be extended to five. A Chapter 13 trustee will set up your payment plan much like a debt consolidator would and they will be paid a percentage of your monthly payment so there is some expense involved but this may be a good compromise.