It can be challenging to decide whether bankruptcy or debt consolidation is the best decision. While it might seem strange, some people decide to take out a loan at a lower interest rate to repay another amount of money. Other people decide to declare bankruptcy, which has its own attractions and challenges. These options frequently involve a person either discharging debt through Chapter 7 bankruptcy or creating a payment plan through Chapter 13 bankruptcy. In deciding which option is best, it is a wise idea to speak with an experienced attorney.
Debt Consolidation as an Option
Debt consolidation allows a person some significant advantages. One of the advantages of debt consolidation is that a person makes one payment to one lender rather than juggles the demands of various lenders. Some people are even able to obtain debt consolidation with low interest rates below 10%, which makes it much easier to manage debt. Another debt consolidation perk is that a person is often able to establish an end date at which he or she will be finished repaying a debt.
Despite these advantages, there are some recognized setbacks to the option of debt consolidation. For one, a person needs a good credit rating to qualify for a loan and only the best credit scores are likely to result in the lowest interest rates. Unfortunately, many people who experience financial difficulties have bad credit scores which can make obtaining debt consolidation impossible. Also, debt consolidation results in a person paying off a new debt rather than an existing debt.
Pursuing Bankruptcy Options
There are some obstacles that can make the bankruptcy option challenging. For one, a person must have a minimum amount of income to establish that debts are capable of being repaid through Chapter 7 bankruptcy. Sometimes, a person is even required to surrender nonexempt assets to pay off a secured debt. Another obstacle associated with bankruptcy is that a person might lose assets, which are used to pay off debts. In bankruptcy, only a person’s exempt assets are capable of being protected from bankruptcy.
Despite the obstacles associated with bankruptcy, there are some recognized advantages. One of these advantages is that bankruptcy offers a person the opportunity to escape debt. With Chapter 7, a person can dispose of some or all debt, while in a Chapter 13 bankruptcy, a person arranges a repayment plan for any debt. Bankruptcy also offers the option to rebuild a person’s credit over an extended period of time.
Speak with an Experienced Bankruptcy Attorney
While people with debt problems decide to use consolidation, other individuals select bankruptcy. Often loan consolidation is for individuals who are certain that their financial situation will improve, while bankruptcy is an appropriate for individuals who are having a more challenging time with finances. To navigate either process, it is often critical to speak with an experienced attorney like Jim A Lyon, who has helped many other people determine and use the most suitable bankruptcy process. If you are debating between debt consolidation or bankruptcy, contact our law office today for assistance.