If you are burdened with credit card debt to the point where you can no longer meet your monthly obligations, you may be seeking help from one of the many debt consolidation companies whose advertisements permeate the media. But before you do this, you should consider bankruptcy. There are many reasons that bankruptcy is a better choice than a debt consolidation loan. The following are among the most important considerations:
Bankruptcy will leave you free and clear of debt
Regardless of whether you file for a Chapter 7 or a Chapter 13 bankruptcy, at some point, you will no longer have credit card debt. If you qualify for a Chapter 7 bankruptcy, your credit card debt will be wiped away. With a Chapter 13 filing, your debts are reorganized and often reduced, and after making a predetermined number of payments, your bankruptcy is discharged. You will be debt free. This is not necessarily true with a debt consolidation plan. There can be hidden fees, and along with interest, the loan may be difficult to pay back.
All legal proceedings against you come to a halt
Once you decide on bankruptcy, your attorney will then handle all of the debt issues. Your creditors will not be able to proceed against you, including wage garnishment. If you have a debt consolidation loan, your relief from harassment by creditors may only be temporary. If you struggle with making payments on a debt consolidation loan, you will be back in the same situation, and you may find yourself even deeper in debt. If you find yourself struggling to make payments in a Chapter 13 bankruptcy because your financial circumstances have taken a turn for the worse, it is possible to file for Chapter 7.
Many of your assets are protected
Debt consolidation usually takes the form of a secured loan. One example is the equity in your home. The proceeds of the loan are used to pay off your credit cards, and you will then make a single payment on the loan each month. But all you are doing is trading the unsecured debt of credit cards for a secured loan. If you are unable to make the payment and default on the loan, you could lose the collateral. With a bankruptcy, there are certain luxury items that a judge may order you to sell in order to pay off some of your debt, but many of your assets are protected. A bankruptcy attorney can explain which of your assets will be exempt.
Before you go down the road of debt consolidation, you should first consult with a bankruptcy attorney. Most of them will offer a free consultation, and they can provide a full range of benefits that pertain to your specific circumstances.