Choosing Between Chapter 13 Bankruptcy and Debt Consolidation

When you are in serious debt, it can be difficult to decide your next course of action towards financial stability. Many individuals and businesses try to avoid a bankruptcy solution although it seems tempting. Others have a hard time deciding the best consolidation plans to get back on track. Avoiding bankruptcy isn’t always the best option and taking on a consolidation loan with the wrong terms and conditions can plunge you further into debt. It is important to weight the two courses of action and decide which helps you the most.

There are a lot of similarities between Chapter 13 bankruptcy and debt consolidation. Both offer a way to reorganize your debts so that they are easier to pay off. Usually this consists of consolidating under a single entity such as a bank, credit union, or with the federal government in the case of bankruptcy. You will pay a reasonable amount per month, usually at a lower negotiated interest rate so that you are able to pay it off over time. With the federal government plan, you’re looking at a 3-5 year payment plan. Other institutions may give you a longer or shorter time to pay off your debts.

Securing loans for consolidation can be difficult. In recent years, banks have been less likely to give you a good deal on a consolidation loan. For instance, if you have significant credit card debt and want to consolidate with a bank, you should make sure that the interest rate does not exceed what you’re already paying on your cards. Often this will consolidate your debt but you’ll end up spending more in the long term. Credit unions are more likely to approve you for small personal loans between $5,000 to $10,000 dollars but if your debts exceed that you may need an alternative.

Chapter 13 bankruptcy can help you out if you can’t find a reasonable debt consolidation solution. If you are interested in this solution, you will need to find a lawyer familiar with Chapter 13 bankruptcy to help you file paperwork properly and represent you in court. They will get your petition for this federal help from the courts and negotiate with your creditors on your behalf. This may be seen as an additional expense when you’re already in serious debt but many offer flat rate fees and payment plans to help you out.

Debt can be overwhelming and difficult to deal with when it is your personal financial life at stake or the financial stability of a company you’ve built from the ground up. You can find reasonable solutions to your problems, if not with Chapter 13 bankruptcy than other chapters, such as Chapter 7 or Chapter 11. The first step is to speak to a lawyer who can meet with you to discuss your options and help you decide whether to file or whether to seek out a consolidation solution.