Should I File Bankruptcy or Debt Consolidation

One of the most frequent questions bankruptcy lawyers are asked by potential clients is whether they should file bankruptcy, or employ a debt consolidation company to make payments towards their debts. For those fortunate debtors who qualify for Chapter 7 (which requires no repayment of liabilities but permits often for discharge of all dischargeable debts), the choice is obviously better to make. But what about people who have the facility to make some regular payments to their creditors and don’t qualify for chapter 7?

Fitted out with this choice, most people decide that debt consolidation, rather than filing a Chapter thirteen bankruptcy case, is their optimal solution. However, this is sort of never true. In Chapter 13, the amount you have to repay to your creditors creditors will almost always be less than (or, at worst, equal) to what you will have to reimburse outside of bankruptcy. This is true even if you are required to repay one hundred pc of your obligations in a Chapter thirteen case.

Why is it better to repay 100% in a Chapter 13 rather than doing debt consolidation? Because you do not have to pay for interest increase on unsecured loans in a Chapter thirteen. Also, in Chapter thirteen your repayment schedule will be for up to sixty months (and in several cases can be as little as 36 months).

So if you are in a position where you could have too many assets or revenue to be accepted for a Chapter seven case, but are having trouble managing your regular payments on your mastercards or other unsecured debts, you must check with a bankruptcy lawyer about the chance a Chapter thirteen case. You very well may be ready to pay off all your unsecured loans with cheap regular payments in less than 5 years!
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