How Does Bankruptcy Work? Or is Debt Consolidation Better?

Sometimes the New Year wastes no time kicking you right in the butt. For those of you looking at a bleak 2016 because of your financial situation, there are some hard choices ahead as you decide what to do about mounting debt and the havoc it’s wreaking on your life and future security. You may be considering two different avenues – debt consolidation with a loan or asking how does bankruptcy work? Both are good avenues to clear your debt, but both have some pros and cons that you’ll need to consider before you make a decision.



Debt Consolidation


  • Upon filing immediately stops all creditors from all actions underway to collect on your debt to them.
  • Protects most of your personal property – in some cases even your home.
  • After bankruptcy, all eligible debts are considered discharged.
  • Some lenders and credit card companies consider a recent Chapter 7 bankruptcy as a good risk since they know that you can’t file again for another seven years.


  • Can reduce your payment.
  • Can save you money on interest.
  • Opens up cash flow.
  • Opens up credit previously maxed out or close to it.
  • When done by a reputable company, does not pose any more financial burden.
  • One payment per month instead of running around putting out this fire and that fire, or swapping debt around on various cards.


  • Credit card companies almost always automatically cancel your cards upon filing.
  • Some debts cannot be discharged in bankruptcy and are unaffected by the filing.
  • Bankruptcies hang around on your credit report for seven to ten years, making it difficult to get a mortgage or other forms of credit.
  • You can only file for a Chapter 7 bankruptcy once every seven years.
  • The bankruptcy court might decide that you appear to have run up a pile of debt in bad faith and then filed for bankruptcy If this is the case, they will not be amused.
  • Bankruptcy is a legal procedure best handled by a trained attorney.


Whatever you decide, it’s best to have professional advice and counseling from an attorney that specializes in handling debt. There are a lot of different options that are on the table, and at Van Horn Law Group, we can help you choose your own way out of debt. We have a lot invested in your good outcome, so call us about a free consultation today.

Published by
Chad Van Horn

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