Bankruptcy vs. Debt Reconsolidation
If you are struggling to keep your head above water financially, you may have considered bankruptcy as an option to get a fresh start. However, under the bankruptcy laws, you must undergo “credit counseling” before you can complete the bankruptcy process, so that you can determine if there are other options that will allow you to resolve your problems without bankruptcy. One of those options is what is known as “debt consolidation.” So why wouldn’t you just pursue debt consolidation, rather than incurring the stigma of a bankruptcy? If you are considering Bankruptcy vs. Debt Reconsolidation, contact a bankruptcy attorney at Neuner & Ventura LLP for assistance.
What Is Debt Consolidation?
Debt consolidation involves pooling all of your debts together and thereby making your debt more manageable. In the process, you can clear up longstanding debts, simplify the payment process and perhaps reduce both payments and interest rates. It’s important to understand, though, that it’s consolidation—it won’t reduce your debt at all. At best, it will lead to lower monthly payments and a longer period of time to pay off your debts. There’s another option, known as debt settlement, where you can actually negotiate reduced payoff amounts.
Which Is Best for You?
There are advantages and disadvantages to both strategies:
- With a bankruptcy filing, you’ll be working with an attorney, so you have less concern about fraud or misrepresentation by the person who’s assisting you. With a bankruptcy filing, you’ll immediately have the protection of the automatic stay, so that your creditors will be required to stop contacting you in an effort to collect the debt. Additionally, with a bankruptcy, the slate will be wiped clean, often in a very short period of time. Even if you don’t qualify for Chapter 7, you can have a fresh start in three to five years.
- With a debt reconsolidation, you won’t take the hit to your credit score that you’ll get with a bankruptcy filing. However, you’ll still have most or all of the debt, and you may still struggle to stay current. If you can’t, your credit record could be more negatively affected by a debt consolidation than a bankruptcy. In addition, if your consolidation includes debt settlement, you may have to recognize forgiven debt as income.
Contact Neuner & Ventura, LLP
We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. Our New Jersey bankruptcy lawyers offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another bankruptcy attorney. Evening and weekend appointments are available upon request.
Representing Clients across South Jersey