Debt Consolidation Blog

Archive for December, 2010

The decision to choose between debt consolidation and bankruptcy arises if you have reached at a point where you simply can not keep up the payments regularly then you might have to consider either debt consolidation or bankruptcy as a debt solution.

Without having enough knowledge about each, it seems both are easy and effective to get rid of debt problems. Although both debt consolidation and bankruptcy has their own advantageous and disadvantageous, debt consolidation seems to be a better route when compared to bankruptcy because as most of the people think bankruptcy is the end of debt problems which is not the case.

Debt consolidation means consolidating all unsecured debt from different creditors into one large debt amount. To consolidate you must have to sign a contract with debt consolidation service provider, who will arrange consolidation loan with which you can pay off all the debt with creditors in one go and pay monthly to debt consolidation service provider. With debt consolidation, the consolidator will manage to get you lower interest rate and monthly payments.

Consolidating all the debt into one debt means you have only one creditor. Having only one creditor meaning you will have to pay only one monthly payment before one due date instead of paying to several creditors every month like for different credit cards, store cards and other creditors. Having to pay different creditor monthly meaning each debt carrying different interest rates and requires paying each creditor depending on their due dates.

Apart from lower monthly payments consolidating debt has several other benefits. They are:

When you choose debt consolidation program, it is kept confidential i.e. the program is discreet and confidential it means the information of choosing debt consolidation program is not given to your employers.

Even though the debt consolidation appears on the credit report, it will not affect much of your credit score.

Choosing debt consolidation means you have to stop using all credit cards expect one for the emergency. It means you should make sure that debt is not incurred further.

Before opting for debt consolidation one must know that it covers only unsecured debt like credit card debt, store cards only. Secured debt such as mortgage, car loans and home equity loans can not be consolidated, however you may be allowed to keep them and use.

Bankruptcy is one such word that stops all the legal proceeding that is initiated against you. As bankruptcy involves legal procedure, a person filing bankruptcy need to hire an attorney and submit papers regarding your financial position to bankruptcy court. In this the judge is authority that decides which creditors will be paid and how much to be paid and which debts will write off.

For judge to take such decision on which debts to be cleared and which to write off, the attorney submits all the papers concerned to assets and the assets that are protected from bankruptcy liquidation.

After modifying the bankruptcy laws, filling bankruptcy is not a best choice because even bankruptcy does not write off some debts like secured student loan by fed and at the same time it totally blows your credit score and it will be reported on your credit report for minimum of 10 years.

Articles on this site have been acquired from a variety of sources. No content on this site should be considered financial or legal advice