Consolidation and Debt Discharge in Bankruptcy Proceedings

At one time or another, you are likely to build up some kind of debt. It may be a student loan or credit store, or auto loan or mortgage, but debt is probably going to be a part of your life at some point. Many people that experience debt are going to be able to repay loans and manage their debt with very few problems or complications. Others are going to find that their repayment is going to be difficult, and these individuals will often need to take some measures to make their debt more manageable. These measures can be anything from a simple consolidation to a complete bankruptcy filing, and it is important that you understand your options when dealing with debt.

There are many different kinds of debt that you may be dealing with when you start to consider consolidation or bankruptcy. Unsecured debt is that which is not backed by a personal asset, and where the lender has no legal recourse to claim your assets if you do not meet the terms of the debt. Secured debt would be something like a mortgage or auto loan, and in these cases the lender will be able to possess the property that is put up as collateral. The method that you choose to deal with your debt may change depending on the type of debt that you have.

Consolidation and Debt

Consolidation is often a much better option that choosing to proceed with a bankruptcy. When you consolidate loans, you essentially open a new loan to pay for the other ones, and the new loan will typically come with lower interest rates and a more affordable payment plan. However, with a consolidated debt you will still be required to make payments on the new loan, and while these payments may be much more manageable than the old ones, some people may not have the resources to consolidate.

Bankruptcy and Its Consequences

If you are without means to pay back a debt and consolidation will still leave you with payments that you cannot afford, you may have to choose bankruptcy as an option. If you file for bankruptcy and are successful, the loans that you have from your creditor will be wiped clean. This kind of debt discharge may seem like a great thing, but it can come with some pretty serious consequences. Your credit will be destroyed, and there will be a black mark on your financial record that may make it difficult for you to get jobs or loans in the future.

Both consolidation and bankruptcy are going to come with consequences for your financial future and credit score. However, consolidation is often a much more lenient and forgiving way to repay debt. If you do choose to file for bankruptcy, remember that creditors will be able to claim any collateral on the debts that are not forgiven. You will want to make sure that your debts will be eligible for discharge before proceeding with your bankruptcy filing, otherwise you may still end up owing your creditors a lot of money.

Consolidation and debt discharge in bankruptcy proceedings can be fairly difficult to understand for a lot of people. Rather than taking chances with the kinds of financial problems that a bankruptcy can cause, do your best to fix debt problems before you get to that point. Consolidation is going to be an excellent option for people that need a more manageable way to attack their debt. If you do declare for bankruptcy, make sure you know which debts are going to be forgiven.