Should I Consolidate Credit Card Debt or File for Bankruptcy?

Making the decision to consolidate debt or eliminate it through bankruptcy depends on your circumstances. Can you afford the payments from consolidating? And is consolidation really a good idea? Or do you just want to be free of the debt and move on with your life? These are some of the questions that you need to ask yourself when looking at your options.

Consolidating Your Credit Card Debt

Credit debt consolidation should only be considered when all other options are exhausted. It does offer relief in the form of putting all of your bills into one payment. That payment is now much lower than having to spread the dollars across different accounts. There's now only one lender to pay as opposed to spreading it across many. But it's not without it's own problems.

You may hear the suggestion of taking out a home equity line of credit if you own a home. This type of consolidation puts your home at jeopardy as you're using it as security. An upside is that you may be able to deduct the interest you pay on your taxes, which can't be done with credit card interest. Another consideration is that you'll be paying on the debt for far longer than you would be otherwise, and possibly paying more interest than you would had you stayed with the original creditor. Nor does it help you change your purchasing habits.

Filing For Bankruptcy

If you find that the payments for loan consolidation is beyond your means, you should consider bankruptcy instead. It's not without pitfalls, but it can be an effective tool for restarting your money situation and how you handle it. A filer is required to take credit counseling courses before and after the 341 meeting. The court wants to see filers learn how to use their funds wisely so they avoid returning to file eight years later.

Chapters 7 and 13 will both see debt wiped out at the date of discharge. It's a matter of what's more advantageous to your situation. Chapter 7 is a complete liquidation of all that you own while Chapter 13 can last up to five years while you're making payments towards your debt. Chapter 13 is best for those who have enough income every month to service debt and would also like to salvage their credit.

Consult a Lawyer

Talk to a bankruptcy lawyer before making any decisions. You'll be advised on the best solution for your situation, whether it be credit debt consolidation or bankruptcy. Having the advice at hand will help you avoid making a bad choice that may eventually drive you to file for bankruptcy.

Think Bankruptcy Might Be for You?