If someone is struggling with large amounts of debt, they may be weighing their options between debt consolidation and bankruptcy. There are positives and negatives to both- but ultimately, it depends on a person’s specific financial situation and life circumstance as to which choice is the right one for him or her.
What is Debt Consolidation?
Debt consolidation involves combining a person’s older debt from various sources into one new debt. This consolidation could be done by taking an unsecured personal loan to pay for the total amount owed or by transferring balances from multiple credit cards into one credit card.
Debt consolidation involves making payment to one lender, oftentimes at a lower interest rate. These are two of its appealing factors. However, we can tell you that debt consolidation rarely provides a long-term solution. Our attorneys have helped many clients who were promised one result from a debt consolidation company only to receive far less, and stuck with the remaining debt.
Here are some of the disadvantages of debt consolidation.
- The debt cycle continues: While this option allows the consumer to consolidate multiple sources of debt, it only pays off that debt to combine it into one larger balance. Many consumers make the mistake of utilizing debt consolidation only to continue the cycle of debt.
- Delaying the inevitable: Debt consolidation is oftentimes used as a ‘temporary’ fix, only delaying the inevitable. If a person is struggling to pay off various forms of debt, particularly if that debt is medical debt, credit card debt or personal loans- bankruptcy might be a better option, as the consumer would receive a complete discharge of these debts.
Choosing Bankruptcy as an Option.
Depending on an individual’s income and amount of debt, pursuing a Chapter 7 bankruptcy case may be the wisest option to discharge the debt or a Chapter 13 bankruptcy case to reorganize and pay down qualifying debt. One factor to keep in mind is debt consolidation is a big business. It can be successful for some people, but for others, it may not provide the long-term solution the consumer needs. The attorneys at Kingcade Garcia McMaken have helped thousands of people restart, rebuilt and recover through bankruptcy.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.