With life being so unpredictable and changes happening so drastically, sometimes financial woes and money hardships are just part of the equation. Whether it was the loss of employment, a change in your ability to work, a divorce, or something else, you may be facing a few different options to help you wade your way through to the other side. Two common ways for people to get through a sticky situation with mounting debt is filing for bankruptcy and seeking some type of debt consolidation. Which one is the best? Here are a few things that you should know.
Debt consolidation can be better if you want to maintain your credit score, but not always.
One of the things people fear the most when they are considering filing bankruptcy is how much damage will be done to their credit score. It is true that filing bankruptcy can have a negative impact on your credit, but debt consolidation is likely to have a lesser impact. However, this is not always the case. It will depend on what accounts are consolidated, how behind you are on payments, and whether or not the creditor is willing to work with you on consolidation.
Bankruptcy is a better alternative if you are in an extreme financial bind.
If something has changed so drastically about your financial status and you have an obscene amount of debt, debt consolidation may not be a feasible option. Debt consolidation involves pulling several of your overdue accounts into one lower monthly payment. However, if there is a lot of debt to contend with, the payment may not be low enough that you can swing it with your smaller budget. In some situations, filing bankruptcy is ideal because the owed debts don't always have to be paid back, depending on what kind of bankruptcy you file.
Debt consolidation and bankruptcy both have their perks, but both are specifically suited to certain situations.
While both debt consolidation and filing bankruptcy are designed for debt relief, they are two completely different things. Therefore, the advantages of each have to be paired with the individual circumstances you are facing to determine what will work best for you. It is always a good idea to consult a bankruptcy attorney and a debt consolidation expert before making your final decision just to get a better idea of what the pros and cons would be for you.Share