Credit consolidation can be one way to work out your existing debts and possible save you some money on the repayments of those debts. Consolidating debts mean you take multiple payments that are due and combine them into one monthly or weekly payment. There are different pros and cons to credit consolidation. You may be able protect your credit score, keep access to your existing credit and possibly lower your interest rates. Some possible cons of credit consolidation include: losing your personal property as well as you home, there are negative tax consequences and the actual cost to do a consolidation can be excessive. If you have a wage garnishment or judgment against you there is usually little credit consolidation companies can do for you. Most of the people I have had look into doing a credit consolidation come back and warn of the high hidden costs associated with pursuing such a course of action. Always factor in the fees to the amount of potential savings. The credit consolidation industry has had a troubled past with some players in the industry taking a lot of money from people but delivering very little – it does take effort on your part to seek out reputable people in the industry that can help you… Always remember if it sounds too good to be true it probably is.
Pros of filing for bankruptcy is that you can get a fresh start quickly in most cases and you will get immediate protection from your creditors (ie stop a wage garnishment or a foreclosure). Cons of bankruptcy are that some of your assets (stuff) might be lost unless there are laws in your area to protect your things – including your home. In some types of bankruptcy cases you will probably have to make some sacrifices including re-payment of all or nearly all of your debts. Finding a qualified professional takes some effort and you should interview a number of bankruptcy attorneys before you hire one. As I have mentioned elsewhere in this blog you will do well to stay away from bankruptcy petition preparer services – these are merely typists that prepare the documents but cannot give you legal advice. I can give the same word of warning about the bankruptcy industry – if it sounds too good to be true it probably is.