Bankruptcy vs. Debt Consolidation
It seems that everywhere we look, someone we know is having financial struggles. While some months it feels that the economy is turning around, other months and other news reports reveal the exact opposite. Bankruptcy and Debt Consolidation are popular debt management strategies that are utilized by roughly one million people each year in the United States. Is one strategy better than another to help you find the financial relief you need now with the least detriment to your financial future?
It is important to understand the differences between Bankruptcy and Debt Consolidation. Let’s look at Bankruptcy first:
- Bankruptcy allows you to eliminate your debts or to restructure your debts through a supervised repayment plan.
- With Bankruptcy you get the protection of the automatic stay, which prohibits creditors and collectors from engaging in collection activity against you. This stops harassing phone calls, lawsuits, repossessions, garnishments, and foreclosures.
- You get a fresh start through Bankruptcy.
- However, those who file bankruptcy will also endure a negative impact on their credit rating, and most people who file are unable to receive credit cards or loans while Bankruptcy is on their record. This impact can last for seven to ten years.
- Bankruptcy is public record. That means that an employer, nosy neighbors, family members, and friends will be able to search and find out that you have filed for Bankruptcy.
Let’s take a look at Debt Consolidation:
- Debt Consolidation is not a matter of public record, and you can therefore protect your reputation and credit rating.
- Debt Consolidation allows an easy payment plan. It will consolidate your debts into one payment at one interest rate – making it much more convenient and cost effective in the long run. Most people who choose Debt Consolidation will obtain a more manageable monthly payment with a lower interest rate.
- During Debt Consolidation periods, you are able to maintain access to credit. However, continued use of credit cards will only get you into more debt, and this continued use can cause the cancellation of credit altogether.
- With Debt Consolidation, there is the chance that any property you use as collateral could be lost if you default on your loan payments.
- People must also understand that the IRS can consider money saved from Debt Consolidation income, and you would have to pay taxes on that money.
At Gingold & Gingold, LLC, we are expert bankruptcy attorneys who have your best interest at the forefront of everything that we do. We can help you determine which strategy is best for your financial situation – both now and for the future. If you have creditors calling and you cannot make your payments, please call Gingold & Gingold, LLC today.