If you want to pay off your debts and save for the future, you can get help from the debt relief options such as the debt consolidation or settlement options. You can also take help of debt management options too if you want to work according to a plan. Filling for bankruptcy must be your last option as it really financially damaging. But try to observe other options before you actually file for bankruptcy.

Differences between debt consolidation and bankruptcy

Bankruptcy and debt consolidation both help you get out of debts. But debt consolidation helps you save further for your future and have a good creditworthy life. In case of bankruptcy, your debts are discharged, but you may not be creditworthy for quite a number of years. Read on to know the differences so that you know the right choice for you:

1. Credit score

The credit score really gets affected in case of bankruptcy. It may go down by 250 points and it remains in your credit report for 7 years for Chapter 13 and 10 years for Chapter 7. After the time period is over, you may ask the credit bureaus to remove it form your credit report. But for debt consolidation, your credit score gets improved and you may also get to borrow credit after your debts are paid off in full. You just have to think before you get going with any of these options.

1. Assets

In case of debt consolidation program, you don’t need to sell any of your assets to pay off your debts. You just need to have a budget and you can pay off your debts in full. But in bankruptcy, the state exempts your assets to get back the amount you owe. To purchase a new house or a car, you need to take out a loan which becomes difficult for you when you file for bankruptcy. But when you consolidate your debts, your credit score allows you to take out a loan for further renovations or other purchases.

1. Stress

When you go for bankruptcy, you have to go through a lot of stress and tension but not when you consolidate your debts. Your credit score can make you and break you. So, if you need to make your credit scores look good, you can go for debt consolidation as it improves your credit scores. But if you go for bankruptcy, your credit scores go down a lot and you also suffer a lot in your life. You’re left with nothing in your life when you file for bankruptcy. That adds to your stress level a lot.

These 3 differences will really make you understand which one’s better for you. Try to consult your family members before you take any step so that you don’t incur any more debts.