Bankruptcy Vs. Debt Consolidation

Bankruptcy Vs. Debt Consolidation

When you get overwhelmed in debt and feel there is no way out, it is usually time to look into a legal solution that can help you keep your assets and also stop the credit collectors from calling you. Many people believe paying off their debts through debt consolidation is the option that will eventually leave you in the best financial shape, but this is not always the case. Sometimes filing for bankruptcy is much more beneficial in both the long and short term and a Los Angeles bankruptcy attorney can guide you in the direction that suits your needs best.

With debt consolidation, you will still be paying out money each month you may not be able to afford. A debt consolidation agency will work out a settlement with you creditors that can often lower the principle on the debt, eliminate late fees and also lower interest rates. You will usually send your payment directly to your debt consolidator each month and the company will pay your creditors for you. The phone calls may stop, but the headaches may not. A bankruptcy lawyer in Los Angeles can let you know that a debt consolidation can do just as much damage to your credit as bankruptcy will. However, with bankruptcy you can start fresh without paying out money each month and debt consolidation will cost you money, while still lowering your credit score.

One very important thing that most people considering debt consolidation do not know is that they may owe more in taxes going this route. If your agency settles your debts for less than half of what is actually owed, the difference will be considered income and you will need to pay taxes on that income. A bankruptcy attorney in Los Angeles will help you make a tax-free decision if you choose the clean slate that bankruptcy can offer you.

Debt consolidation may seem like the option with fewer stigmas and you may feel you are doing the right thing by paying at least some of what you owe each month, but it can be more of a hassle, as well as take more of a toll on your pocketbook than bankruptcy. Of course, every individual situation is different and debt consolidation can suit your needs well. But, if you are waffling on which way to go, calls a Los Angeles bankruptcy lawyer today to learn which option may be best for you.

Share this post