One commonly advertised solution for those struggling with overwhelming debt is debt consolidation. If you are trying to decide between debt consolidation and bankruptcy, you need to know all the facts before making your final decision. Even though you may be determined to pay it off, it can be difficult to know where to turn for help. Not every company has your best interests at heart, and some may even be scams.
What is debt consolidation?
Debt consolidation is ultimately yet another form of debt. It’s a loan that allows you to bundle some of your debts into a single payment. In the end, you may end up even more deeply in debt than you were before because:
- It cannot prevent your creditors from harassing you.
- It will not include all your debts, either secured or unsecured.
- Your creditors may not all agree with your proposed solution.
- There may not be a specific time period for or end to your payments.
- Your credit score and finances may be negatively impacted by late fees and penalties.
- Any debt that is forgiven will be taxable.
A consolidation loan may work well for some people, but it is not an appropriate answer for everyone.
What can bankruptcy do for you?
On the surface, Chapter 13 bankruptcy works similarly to debt consolidation. A repayment plan will be created that will allow you to make one payment for all your debts, but that’s where the similarity ends.
Your payments will last for three to five years, depending on your financial situation. At the end of your repayment plan, any remaining debts will be discharged. Your secured and unsecured debts will be included in the plan resulting in non-taxable discharged debt. The U.S. Bankruptcy Code protects the rights of the debtor throughout the bankruptcy process.
For more information, call 866-501-8500 & speak with an
ABQ bankruptcy attorney today.
If you are torn between debt consolidation and bankruptcy, our experienced bankruptcy attorneys can provide you with valuable advice as you make this decision. Contact the Albuquerque bankruptcy lawyers at Melwani Law today for a free initial consultation.