If creditors are currently dinging you for debt payment – or you’re worried they will – the nightmare cycle can start all over again with a personal loan. Bankruptcy may be a better solution than a personal loan for debt consolidation. Here's why.
If you have a significant debt load every month, you may be considering consolidating those debts. Many folks interested in debt consolidation consider taking out a personal loan. Consolidation includes paying off debts with the proceeds of the loan, and then making payments on the loan.
That’s one way to consolidate debts, and it works for many people. The advantage is a single monthly payment, rather than multiple smaller payments (on credit cards, for example), which can make payments easier to manage. Crucially, interest rates on personal loans are much lower than credit card interest rates, so your payments can also be lower.
But a personal loan doesn’t always work for everyone. If your debts are too big to handle on your current income, a personal loan isn’t going to help that much. You can still have trouble paying off the personal loan – and eventually, you may lapse into nonpayment, which means the financial institution that granted the loan will come after you.
If creditors are currently dinging you for debt payment – or you’re worried they will – the nightmare cycle can start all over again with a personal loan.
Bankruptcy: The Better Solution?
Frankly, if you’re in debt over your head right now (or fear you may soon be), bankruptcy may be a better solution than a personal loan for debt consolidation.
Yes, we know that the word “bankruptcy” looms in large scare quotes for many people. You may associate it with dire financial straits or being left with nothing.
But in fact, bankruptcy can be very helpful to people struggling under large amounts of debt. There’s no shame in bankruptcy: it’s a method of managing your debts. Right now, the COVID-19 pandemic and the challenges posed by widespread lockdowns have driven many people into debt or made them unable to pay mortgages, medical bills, or taxes. Bankruptcy is a way out, and here’s how it works.
There are two types of bankruptcy, Chapter 7 and Chapter 13. They accomplish the same thing in different ways. The type of bankruptcy you file depends on the type of debt you have. In short, your dischargeable debts are consolidated and ultimately discharged in both types of bankruptcy – exactly the outcome sought by taking out a personal loan for debt consolidation. Give us a call for a free consultation, and we can determine which type of bankruptcy is best for your situation.
Bankruptcy payments are geared to your income and manageable, which may not be the case with a personal loan. In addition, a personal loan offers no legal protection against creditors. If they are threatening to garnish your wages, for example, they can continue to threaten. A bankruptcy offers a stay against creditors contacting you.
Once your debts are managed, you can start building your credit – and your credit score – back up.
Just remember, bankruptcy is a solution, not a problem.
Talk to a Lawyer About Debt Consolidation and Bankruptcy
If you need help with debt, bankruptcy can be a way out. Both types of bankruptcy are designed to discharge debts in a manageable way. Bankruptcy is not shameful; it’s facing up to your problems and managing them.
If you have questions or concerns, our bankruptcy lawyers provide a free initial consultation to discuss your situation. We’re more than happy to answer questions. Call us today at 229-247-1211.