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How does bankruptcy compare to debt consolidation?
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How does bankruptcy compare to debt consolidation? I have accrued far too much debt over the past few years, and recently lost my job. My husband is still working, but we've lost a huge part of our income.
I was thinking about consolidating our debt, but we would need to get the payments cut in half to even have a chance. Is this possible, or is filing for bankruptcy a better option?
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Debt consolidation is a great option for reducing interest and minimizing monthly payments. This is especially true of high interest debt such as credit cards, but not as effective for lower interest debt.
Keep in mind, there are many "debt consolidation" companies that prey on people in financial distress in order to turn a profit. Be careful when looking at debt consolidation or "debt settlement" companies that ask for any money up front.
Bankruptcy, on the other hand, can erase much of the principle of the debt and can greatly reduce or eliminate monthly payments. However, bankruptcy carries with it some negative credit aspects. Bankruptcy should be considered by people who cannot realistically pay off all of there debt within three to five years.
For more information about how bankruptcy works, check out some of the reference links below. Good luck.
References:
Posted by Staff Writer on 10 Feb 2010
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