Many people who are struggling with debt wonder whether they would be better off working with a debt consolidation firm rather than filing for bankruptcy. There are advantages and disadvantages to both options, and it is important that you have a good understanding of each program and its long-term impact before you make any decision.

When you consolidate your debt, it does give you the advantage of protecting your credit rating and simplifying your bill payment down into a single payment. You do not have to worry about anybody in your community or a future employer discovering a bankruptcy filing in your past, and you are able to keep your credit cards and maintain your access to credit. You may even be able to take advantage of a low introductory interest rate. With a bankruptcy your credit rating will be negatively impacted and you are likely to have to give up some nonessential or luxury possessions. The filing will also be publicly available information, and may become an embarrassment or a roadblock for future opportunities.

All that being said, there are several very real disadvantages of using a debt consolidation to alleviate your financial difficulties. One obvious one is that if you opt for debt consolidation, you end up paying back your creditors. Filing for chapter 7 bankruptcy eliminates that legal obligation. Though you may believe that you should try to do the right thing by your creditors and attempt debt consolidation first, you may find that you are unable to do so and will have needlessly paid money to your creditors. The other thing that you need to keep in mind is that not all of your creditors will necessarily agree to allow your debt to them to be consolidated – you may end up with a debt consolidation that covers part of your debts, but not all. By contrast, when you file for bankruptcy you are able to make a fresh start, without having to worry about your creditors not wanting to agree.

Another big advantage that bankruptcy offers while debt consolidation does not is protection from debt collectors. If you have ever been harassed by a debt collector, you know that it can be a very unpleasant experience, no matter what protections you may legally have. Once you file for bankruptcy, all of those calls cease, and if you do receive them you can just refer the callers to your attorney.

Where filing for bankruptcy provides you with clear and straightforward rules, debt consolidation is up to the individual creditors and credit company, and that means that you can end up paying higher interest or unknowingly putting your property up as collateral. For a one-on-one discussion about the best way for you to address your particular situation, contact the attorneys at Reinherz Law today.