Bankruptcy and Debt Consolidation – What to Choose and Why

It is rarely simple to find the best way to avoid debt because of your situation. Companies that promote debt solutions can usually focus only on one option that may not be appropriate for your situation. Here is what you need to know about debt consolidation and bankruptcy; two of the essential means of resolving debt in Oklahoma.

Debt

What is Debt Consolidation?

Debt Consolidation is a relatively easy way to get your debt paid. The objective of debt consolidation is to lower your interest rate on the debt you owe, allow you to pay lower interest fees and pay off your debt in easy payments. Debt consolidation could also have a positive impact on your credit score.

Criteria

  • A minimum credit score of 600 FICO

  • A low debt to income ratio of less than 40%

  • No recent record of bankruptcy

Benefits

  • Make a payment to a particular lender

  • Lower interest rate is possible

  • There can be an end date for the debt

  • No severe damage on credit score

  • The scope of improving the credit score

  • There’s no risk of losing personal property

  • It may be easier to qualify

What is Bankruptcy?

Bankruptcy is another way of eliminating your debt, but it is usually harder than consolidating the debt. There are two main sections of bankruptcy: Chapter 7, often referred to as bankruptcy of liquidation and Chapter 13. Whatever type of bankruptcy you file for, seven to 10 years after filing it will hurt your credit score. Both forms of bankruptcy can be complicated, and you may feel confused about how to file bankruptcy in Oklahoma. Here, it would help if you recruited a bankruptcy lawyer for it.

Criteria

  • Your monthly income, based on the family size, should be below the average state income.

  • Your disposable income should not be more than your debt.

Bankruptcy

Benefits

Chapter 7

  • You can discharge debts quickly, within 4 to 6 months

  • You don’t have to pay back the entire amount

  • Forbidden harassment from the collectors

  • You may keep some of your property

Chapter 13

  • You can pay back the amount over 3 to 5 years.

  • Your debts are discharged after the repayment plan.

  • Make one plan and skip dealing with multiple debts.

  • Save your assets from foreclosing

  • By law, no collector can bother you for the payment

  • You will be protected from consumer debt liability

  • It may reduce the monthly installment.

How to Choose?

Debt consolidation is generally better than bankruptcy because it places you in the driver's seat. For example, you simplify your repayment with a debt consolidation loan. You are also starting to work towards a debt - free date. However, for everyone, debt consolidation is not ideal.

If your debt is beyond consolidation, you could take bankruptcy into account. In your financial life, it's nearest to getting a redo. In the case of the court, you can even be relieved from a chunk of debt or all of it.

Check a credit adviser or a bankruptcy lawyer with professional advice to make your best decision. Come to us at Chris Mudd and Associates for experts’ advice on debt solutions.

** Disclaimer: This blog post does not constitute legal advice, nor does it create a client-attorney relationship.