Anyone under crushing debt will desperately want to get out. Debt does more than suck away your money. It adds stress and limits your options. Both debt consolidation and bankruptcy are possibilities when it comes to restructuring your finances and getting a new lease on your financial life. However, they aren’t created equally.

Here are some things to consider when making this determination.

DEBT CONSOLIDATION OR BANKRUPTCY? CONSIDER WHAT YOUR DEBT IS

Bankruptcy can discharge many of your loans and allow you additional breathing room. Dealing with the initial negative ramifications may seem preferable to continuing under so much debt. However, bankruptcy won’t eliminate all debts. The Times points out that the biggest debt source that can’t be discharged is student loan debt. Even with private student loans, the debt can’t be removed unless they were not categorized as student loans to begin with or you meet certain narrow criteria. If the majority of your debt comes from the following, bankruptcy probably isn’t the best option

• Student loans
• Child arrears
• Legal judgments against you for fraud, embezzlement, or similar crimes
• Back taxes and government fees

Consider What You Need to Do in the Next Few Years

Bankruptcy can provide relief, but it will also restrict your options for a time. Your credit will not be permanently destroyed after you file bankruptcy. Credit.com reports that most of the damage and impact will be felt within the first few years. If you’re planning on buying a home or a business or any other major purchase, bankruptcy will certainly make you put it off. Through debt consolidation, you may not be guaranteed additional financing, but you have a greater chance for success than if you declared bankruptcy.

What Kind of Relief Does Debt Consolidation Really Bring?

The primary relief you obtain from debt consolidation is lower monthly payments to a single source. If you choose to go through an agency, the agency will divide the check up among your creditors. In many cases, the agency may even be able to negotiate lower rates for you with an extended repayment plan. The downside to this is that your interest rates are likely to be higher. However, given the added breathing room will reduce your stress and hopefully give you a firmer ground to stand on. As for what it will do to your credit rating, it all depends on whether you remain current with and eventually pay off your debts. In some cases, consolidation can even improve your credit score.

Finding a solution to your debts is essential. In some cases, you may find yourself having to choose between consolidation and bankruptcy. While both have their benefits, they won’t work the same. If your debts are not of the sort that can be discharged through bankruptcy, you should use consolidation. The financial decisions you need to make in the upcoming years will also impact whether this is right for you.

In terms of relief, bankruptcy can discharge your unsecured debts among others whereas debt consolidation will put them together in lower monthly payments. In some situations, it can be difficult to determine the best solution for you. Consider talking to an attorney at the Van Horn Law Group for discovering the ideal path for you.