Which is Right for You?

Have you been debating over declaring bankruptcy or enrolling in a debt consolidation programs? Both have their merits, but some consumers are probably better off with one over the other. While we'd highly recommend debt consolidation for most consumers, certain circumstances may be better suited to bankruptcy. If you're trying to make the decision for yourself, check out this look at the pro's and con's of each:

Bankruptcy

• Pro - The greatest advantage bankruptcy has to offer is the ability to legally clear your debt with lenders. Although it can sometimes become a difficult legal process, declaring bankruptcy typically allows you to restart your finances from start. However, as we'll address in the con section, you may still end up paying back part of your debt.
• Con - Perhaps the worst aspect of bankruptcy is that it will have a negative effect on your credit score for years to come. After declaring bankruptcy, getting approved for any new line of credit will be extremely difficult and will likely come at a very high interest rate.
• Con - Another major problem with bankruptcy is that there's no guarantee that it will completely clear all of your debt. In some cases, consumers still end up paying back much of their debt or losing valuable assets. Obviously, they would have been much better off taking advantage of debt consolidation.

Debt Consolidation

• Pro - Since you'll still be repaying most of your debt back with debt consolidation, it's important that you at least get better terms. With the skilled negotiators employed with debt consolidators, you have a great opportunity to get improved interest rates on your debt. Many consolidators are able to get their clients much better interest rates through their negotiations process.
• Pro - When you enroll in a debt consolidation program, your main goal will be to quickly bring down your total amount of debt. Not only is that good for your budget, it could potentially help your credit score as well. Your total amount of debt plays an important role in determining your score, so lowering it will only benefit you in the long run.
• Pro - One of the best things about debt consolidation is that you're able to put yourself on a path toward a permanently debt-free lifestyle. Your debt consolidator will take the time to create a custom-made budget that allows you to live comfortably, while letting go of all the debt that weighs your finances down.
• Con - Perhaps the only real con of debt consolidation is that it doesn't work miracles! While it is by far the most effective tool in quickly clearing debt, it still takes some time and effort on your part in order to be successful. Paying off your debt won't happen overnight, especially if you've accumulated a lot of it, but you can put your confidence in the process.