Is Debt Consolidation The Same As Chapter 13 Or 7 Bankruptcy?

When considering their debt resolution options, many are confused about the differences between debt consolidation and Chapter 7 or 13 bankruptcy. The truth is, the difference between the two is vast. Statistics are showing us that more and more people are filing for bankruptcy these days, especially in times of economic distress. Still many are looking to debt consolidation as a an alternative

Bankruptcy is an option for people who do not think they will have the capability to pay off their debts in a normal and timely fashion In bankruptcy, a consumer’s debts are brought together and many of them discharged. While the person is no longer obligated to pay these debts, there are many consequences that can occur. The negative effects of bankruptcy on a credit file can be disastrous and long-lasting, prohibiting consumers from acquiring credit for many years. Assets can be liquidated to pay off a percentage of outstanding debts. Many see this route as a last resort.

A Chapter 13 bankruptcy involves a plan to repay some or all of the money owed over a set amount of time. This can damage the consumer’s credit file, but not as drastically as in a Chapter 7 bankruptcy, where debts can not be paid over time, assets are liquidated and the majority of debts discharged.

Alternatively, debt consolidation is the process of receiving a single loan to cover and replace many unsecured debts, which can include education loans, credit cards, car loans and so forth. People who are making payments on a number of credit cards, for example, can combine all of the credit card balances into one lump sum, making one single payment each month. This payment is often much lower and more manageable than making 10 payments to 10 different creditors. Interest costs usually are greatly reduced as well.

While a bankruptcy usually involves lawyers, and the arrangements are finalized by a court representative, debt consolidation loans are handled privately, being provided by a bank or credit union. Debt consolidation brokers can make the process smoother and simpler for the consumer. With a debt consolidation program, a person can be able to keep his or her credit score intact, without requiring credit counseling. In fact, credit scores can actually improve in debt consolidations. Consumers are also less likely to lose assets in a debt consolidation as opposed to a bankruptcy.

Before filing for bankruptcy, consider the route of debt consolidation, which may prevent many headaches and long-lasting consequences.

In Conclusion, by researching and comparing several debit consolidation providers, you are able to qualify and determine the one that meet your your very own financial situation, plus the cheapest interest rate available on the debit consolidation market. Nonetheless, it's advisable working with a trusted and reputable debt counselor before even make any decision, this way you will save time through specialized advise & money by getting the best results in a reduced period of time.

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