Credit Card Consolidation Vs. Bankruptcy
by Jon Faranda
Credit card consolidation loans take several smaller debts and combine them into one loan. Bankruptcy is a method to get rid of all or most of your debts, with possible long-term negative effects on credit and buying power.
Debt consolidation is often confused with debt negotiation. Debt negotiation is the process by which you negotiate with creditors to reduce your debt. It often has a negative impact on credit, and may or may not result in a consolidation loan after negotiation.
With debt consolidation loans, you may be required to pay more money over time, due to possible higher interest rates and increased loan length. Filing for bankruptcy, though, may put your assets at risk of being completely liquidated.
Bankruptcy has a significant negative impact on your credit score. Conversely, if all payments are made in full and on time on consolidation loans, your credit score is not negatively impacted.
Consolidating your credit card debt will typically reduce monthly payments, and you will only have one bill, instead of several. Bankruptcy may be able to reduce your total debt significantly or altogether.
The Bankruptcy Abuse and Consumer Protection Act has made it more difficult for consumers to file for bankruptcy. Consult an attorney to see what options are available to you.