Differences Between Bankruptcy And Debt Consolidation
There are huge differences between bankruptcy and debt consolidation services. If you’re filing a chapter 7, you are going to get a fresh start. If you are using a debt consolidation service, you are going to wind up paying back to creditors. It’s quite possible that you really don’t have any legal obligation to repay creditors if you file for a chapter 7 bankruptcy. If you don’t file for chapter 7 and you want to repay your debts, then debt consolidation may work for you. However, in my experience, I have seen too many cases where somebody has been in debt consolidation only to wind up filing for chapter 13 or chapter 7 bankruptcy after they have given away thousands of dollars to a debt consolidation company. The problem with debt consolidation is that it doesn’t have any strength. Creditors have to agree to be part of the program or they can opt out. With chapter 13 bankruptcy, the creditors must be part of the program or they are in eliminated. So there is a huge difference between debt consolidation and chapter 13.
Advantage of Chapter 13
Another great thing about chapter 13 as opposed to debt consolidation is chapter 13 bankruptcy is administered by the court under the supervision of the federal court. What that means is you are going to have protection, that your creditors are prohibited from contacting you and prohibited from taking any type of collection actions against you once a case is filed. Further, the bankruptcy code dictates how much your creditors are going to receive over the next 3 to 5 years pursuant to a proposed plan to repay your debt.
Under debt consolidation, there is no guideline and the creditors can negotiate freely with the debt consolidation company each one vis-à-vis each other. Plus, chapter 13 is the best way to consolidate your debt and the best way to protect yourself from creditor harassment and creditor collection efforts. Even better, if you qualify for chapter 7, you won’t repay back any of your creditors. In the end, you must do what is best for you and for your family. If you feel that a fresh start is the better option, then I encourage you to learn more about it. If you desire to payback either all or a percentage of your debt over time, then Chapter is something that you should explore. As always, contact an experienced attorney to guide you through the process.