Which Is Better Bankruptcy Or Debt Consolidation ?
Debt consolidation and bankruptcy both are very sensitive financial issues. To understand which option to choose if ever faced with a choice between the two, it is important to understand both the terms properly first. Consolidation of debt is the process of bringing multiple debts under an umbrella of single payment. This helps the debtor to pay back less every month after debt consolidation. There would be just one creditor to make the payment to. Now, bankruptcy is the situation where the debtor legally surrenders to his creditor due to his financial inability to pay back. |
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There are two main clauses related to bankruptcy in the law of the US. Chapter 7 allows the debtor to liquefy his assets to clear the debts, while Chapter 13 works like debt consolidation where he gets to keep his assets but has to pay off his debts through future earnings. The reason for comparing Chapter 13 of bankruptcy to debt consolidation is that in the former, one is allowed to bring his car loan, tax debts, mortgage arrears, etc under one hood and pay them off as one big debt. As per the latter possibility, the concerned person can replace some of his unsecured loans like debts of credit cards through one loan to make a single payment every month from then onwards.
The decision to opt for bankruptcy or consolidation of debt should largely depend on the individual situation of the debtor and also on the advice of an experienced lawyer. The debtor should be fully made acquainted with the long term consequences of both the choices before taking any final decision.
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Today, in the present world, the procedures of high risk loans system is very uncertain. According to the borrowers, it’s a tool for the financial crunches as an opportunity for long run consolidation of debt. If we see the markets conditions, there are many available options which give an opportunity to rebuild the credit. Since the interest rates are high as compared to the other loans, borrowers should have money by default to repay it.