Bankruptcy vs Debt Consolidation
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You may have seen a television commercial by a debt consolidation agency, promising to take care of your debt and make things easier for you. While there are a few advantages to debt consolidation, it is important that you consider weighing the pros and cons of debt consolidation versus bankruptcy. Many people are wary about the stigma bankruptcy is thought to carry with it. However, there are many advantages to bankruptcy, including the ability to completely discharge a debt.
At Chang & Diamond, APC, our San Diego bankruptcy attorneys can explain to you the benefits of bankruptcy as opposed to debt consolidation, so that you can make an informed decision knowing all your options.
Contact the San Diego Debt Consolidation Attorneys at Chang & Diamond, APC, today for a free initial consultation. We can discuss your individual case and how bankruptcy can help lead you to a fresh financial start.
The Truth About Debt Consolidation
If you were to enter into a debt consolidation program, you are essentially making a contract with whatever agency you consulted with. The debt consolidation agency will approach your creditors to try to get a lower interest rate and monthly payment. The advantage of this is that if the agency succeeds, you make just one payment to the agency and can put an end to creditor harassment.
However, you will likely pay an administrative fee every month and there are no guarantees the agency will succeed. The agency can deduct payments straight from your bank account. Debt consolidation only covers unsecured debt, like credit cards. You would not be able to consolidate secured debt like your mortgage or car payments. Furthermore, debt consolidation can damage your credit and does not ever liquidate or discharge debt. Instead, it simply transfers debt.
A Fresh Start: Chapter 7 and Chapter 13 Bankruptcy
There are many myths about bankruptcy, including that it will ruin your credit forever. This is not true. While bankruptcy is part of the public record, there are several other advantages. Chapter 7 bankruptcy allows you to discharge certain debts completely. Chapter 13 bankruptcy provides the ability to reorganize your debt so that you can make a payment plan that works for you.
Furthermore, bankruptcy stops any further legal proceedings by creditors. You most likely will be able to keep your home and car. Filing for bankruptcy can also stop creditor harassment and phone calls. Bankruptcy gives you the chance for a fresh start since it is pretty much the only way to get any debt cleared.