What is Debt Consolidation?
Debt consolidation is a strategy used by debtors to manage their debts. It is a process through which you can consolidate your debts through one single payment. All you need to do is, take a debt consolidation loan to pay your unpaid bills, credit card bills and household bills. This enables you to pay one single lower payment on your individual debts. Once you clear off your unpaid bills, it helps in improving your credit ratings. In order to qualify for a debt consolidation loan, the lenders see that you should have the ability to make the new payments in time.
What is Bankruptcy?
Some of you might not qualify for a debt consolidation loan, and then you need to consider Bankruptcy as the last option. It is legal process and differs from traditional debt consolidation in many ways. It protects your assets from being taken off by lenders. It is Federal Bankruptcy Code and can of great relief from debt. Chapter 13 bankruptcy is a type of debt consolidation plan through a court of law. It allows you to structure all your outstanding debts into one single payment. All your possessions and assets are protected under this plan through court. It should only be adopted if there is no way out. The adverse effect is that it stays on your credit report up to10 years. All types of debt are not covered under bankruptcy. Some of which are government funded student loans, child support payments or alimony, certain housing cooperative fees, personal injury and damage caused by the debtor in an accident , fines and penalties owned to government agencies.
You should keep one thing in mind that neither of the two options offer everything. It depends on individual’s financial condition. So, it depends on you to decide which is better bankruptcy or debt consolidation? As it is an important decision, so it is advisable that you seek help from a professional financial advisor who can guide you to chose the right option according to your needs.
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