You may not plan to get stuck facing an overwhelming amount of debt you can’t pay off, but it happens to people all the time for a variety of reasons. If this is the situation you currently find yourself in, you have a few options available, including bankruptcy and debt consolidation. Although they can both help eliminate debt, there are several reasons hiring a bankruptcy attorney often proves to be more effective. 

3 Reasons Bankruptcy Is Preferable to Debt Consolidation

1. Protection Against Creditors

One benefit bankruptcy has over debt consolidation programs is that you will immediately get an automatic stay upon filing. This means creditors won’t contact you or attempt to collect what you owe through a court order. Debt consolidation doesn’t offer this protection, so it’s possible creditors could still garnish your wages or collect on your debts through other means. 

2. Receive a Clean Slate

Filing for bankruptcy will also provide relief from all your unsecured debt. If you file a Chapter 7, you will gain a fresh start with all of your unsecured debts eliminated. A Chapter 13 bankruptcy will allow you to reorganize your debt through an affordable repayment plan that lasts three to five years. In either case, you will benefit from a much higher debt reduction than a consolidation program can provide. Typically, you will still be responsible for paying back all your debt, but a bankruptcy attorney may help you get a break on interest rate fees.

3. Tax Considerations

Debt consolidation can also cause problems when it comes to filing taxes. The IRS may view any money you save from consolidating your debt as income, which means you will have to pay taxes on it. In contrast, any debt discharged in a bankruptcy is exempt from being treated as taxable income.

If you’re serious about regaining your financial freedom, consult a bankruptcy attorney to see which debt relief option is most suitable for your situation. John D. Wieser, Esq., PC, has helped many Rochester, NY, residents successfully discharge their debt through bankruptcy. He has extensive experience handling both Chapter 7 and Chapter 13 filings and can guide clients through the process for either. To discuss the state of your finances with someone who can help you find a solution, contact his law office at (585) 328-0660. You can also visit the bankruptcy attorney online for more information.