Dealing with a massive debt is extremely difficult if you are unable to manage your finances well. However, there are ways in which you can deal with your crippling debt more efficiently. Debt consolidation and bankruptcy are two of the most popular debt management strategies in our country. Hopefully, you are wondering which of the two is suitable for your individual case. Here is a debt consolidation vs bankruptcy discussion to clarify your doubts.
Debt consolidation vs bankruptcy
In order to decide the most suitable option, you must first develop an understanding of the benefits and downsides of each of the two processes.
Debt consolidation: One of the major advantages of debt consolidation is the fact that since the process is not treated as a public record. You can keep it as a secret and preserve your reputation. Also, debt consolidation is not displayed on your credit report. Nor does it affect your score in any way. Consolidating your debt will also help you manage your finances better. In some cases, even allow you to obtain a lower interest rate. However, its downsides include the negative tax implications of the consolidated debt. Therefore, the chances of losing your property to the lending company (when it is declared as collateral and you are unable to repay your debt consolidation loan).
Bankruptcy: The most advantageous characteristic of a bankruptcy petition is that it issues an automatic stay. This order is on your lender’s collection activities and provides you peace of mind from their harassment. Both chapter 7 and chapter 13 bankruptcies allow you to discharge and manage your previous debts and start with a clean slate. Both chapter 7 and chapter 13 bankruptcies will be recorded on your credit report.
Consulting a Citrus Heights bankruptcy lawyer will help you determine whether you should consolidate your debt or file a bankruptcy petition for managing your credit liabilities.