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Pro’s and Con’s of debt consolidation and bankruptcy

debt consolidation and bankruptcy

debt consolidation and bankruptcy

Debt consolidation and Bankruptcy

Millions of consumers are battling to pay debts they cannot afford, including delinquent mortgage payments. Filing bankruptcy may seem like an easy way out, but under new U.S. bankruptcy laws consumers may still be damaged for years. Debt consolidation or settlement may be a better option, as consequences from a personal bankruptcy may be far more disastrous than you could ever imagine.

Financially troubled consumers in debt assume there is no way to convince creditors how bad things are to obtain a reasonable settlement or get more time to pay their bills. But there may be help from creditors more than many consumers realize.

Debt consolidation is similar to refinancing debt. It gives debtors’ the ability to pay lower interest and a lower monthly payment. For starters, calculate what a reduction in monthly payments would do towards paying off debts. Would it be worth the hassles?¬†Regardless of whichever way troubled consumers go, debt relief should be the ultimate goal.

Once the debt consolidation process gets rolling, make sure every creditor is getting paid a small monthly amount, which will improve credit scores over time. Debt consolidation agencies are typically focused on paying the original debt off as opposed to negotiating a one time pay-off.

A debt settlement agency is the most ideal option for consumers who intend to negotiate a lesser amount to be paid. While a settlement may never be reported on your credit report, it is still a good way to indicate positive intentions towards paying debts.

Debt settlement agencies usually prefer dealing with someone with a hardship, who they realize is not financially capable of paying the debt owed. Once the agreed settlement is paid, the creditor will send a letter of receipt confirming that there are no further obligations towards the debt.

debt consolidation and bankruptcy

debt consolidation and bankruptcy

Financial analysts contend debt settlements can be a riskier path than debt consolidation since any missed payments can be reported to credit agencies. Debt consolidation agencies have all the rights to settle accounts, with very little intervention from the original creditor. Consolidations, however, can improve your credit score more quickly as long as payments are made on the agreed timetable.

If consumers cannot afford to keep making monthly payments on debts, a settlement can help end an obligation with creditors, and start the re-building process of credit worthiness, without having to worry about late payment fees, penalty charges and trying to save money for payments.

Debt consolidation is meant for people who are worried about how their credit would be five years down the line. However, the deciding factor between debt consolidation and debt settlement is whether or not you have a steady income for making monthly payments.

So the answer to the best outcome of debt consolidation and bankruptcy, it seems debt consolidation wins hands down!!

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