Answer: If you qualify for a debt consolidation loan, and can afford to make the payments, a debt consolidation loan is better than bankruptcy. If you can’t, then bankruptcy may be necessary. A debt consolidation loan does not reduce the amount you owe; it just combines all of your payments into one.

Is consolidating debt like bankruptcy?

TL;DR: Debt consolidation and bankruptcy are two options for debt relief available to you. Bankruptcy involves discharging or restructuring all your debts—but it stays on your credit report for seven to ten years. Debt consolidation means consolidating multiple older debts into a single new loan.

Why personal bankruptcy is the choice of last resort?

In the end, bankruptcy should always be considered a last resort. Choosing to seek the protection of the Bankruptcy Code is a serious decision. While the Bankruptcy Code may help alleviate your debt, the choice does not come without consequences. Filing bankruptcy will also be reported to most major credit bureaus.

Is there a way to consolidate debt without filing bankruptcy?

There are several ways to accomplish this, including: Enrolling in a credit consolidation program through a nonprofit credit counseling agency. The agency will collect monthly payments from you that include a service fee and pay off your creditors in an agreed upon amount until the debt is eliminated.

What are the advantages of debt consolidation vs bankruptcy?

Here are some of the advantages of using debt consolidation to better manage your debt. Protect your reputation and credit rating. Unlike bankruptcy, debt consolidation is not a matter of public record.

How does debt consolidation affect your credit score?

Although a debt consolidation loan may show up on your credit report, it does not typically lower a credit score like a bankruptcy filing does. Maintain your access to credit. Unless prohibited by the debt consolidation agreement, you can keep your credit cards.

Can You Keep your credit cards during debt consolidation?

Unless prohibited by the debt consolidation agreement, you can keep your credit cards. This might be helpful should an emergency arise. However, if you already owe a significant amount of money or are in default, you might not be able to use your credit cards or be approved for additional credit.

How can I find out if I have a debt consolidation loan?

Anyone who looks hard enough will find out about your bankruptcy. Bankruptcy records are viewable through an electronic subscription service called PACER or at any federal bankruptcy courthouse. Although a debt consolidation loan might show up on your credit report, it does not typically lower a credit score like a bankruptcy filing does.