If you do not qualify for Chapter 7 bankruptcy, debt consolidation and Chapter 13 bankruptcy may be viable options to minimize the amount you owe. But while both of these solutions are designed to alleviate debt, they each work a little differently and offer their own advantages and disadvantages. To help you determine if you should talk to a bankruptcy lawyer, here is a brief guide to these approaches.

Debt Consolidation vs. Chapter 13 Bankruptcy

Money Saved

With debt consolidation, all of your existing accounts are paid off with a new loan. This new loan will be the same total as previously owed but may carry a lower interest rate, allowing you to save more money over time.

Chapter 13 bankruptcy essentially restructures your payments over a specific period so that they are more manageable. If you can meet the monthly payment requirement, any debts that remain after the repayment period has ended will be discharged. You might also be able to avoid interest payments on unsecured debts.

Repayment Period

Repayment for debt consolidation is indefinite. Essentially, you will keep making payments until the loan amount is paid off.

By contrast, Chapter 13 bankruptcy repayment is designed to fall somewhere between three and five years. The specific length of your repayment period will depend on a variety of factors, such as how your bankruptcy lawyer prepared your case, how much you owe, and what your current income situation is.

Credit Impact

Debt consolidation pays off existing debts with a new loan, resulting in no immediate adverse effects on your credit score. If you make payments and do not accrue additional debt, your score will improve. However, if you are unable to repay the loan and enter another cycle of debt, your score will likely go down.

Chapter 13 bankruptcy has a lasting impact on your credit score. Specifically, it will show up on your credit report for up to seven years. Fortunately, after this period has ended, you have the opportunity to rebuild your credit.

Whether you’re struggling to pay off credit card debt, medical bills, or personal loans, Padgett & Robinson, Attorneys At Law is here to help reshape your financial health. Staffed by experienced bankruptcy lawyers, this Mobile County, AL, law office is qualified to review your debt situation and determine if you’re a candidate for Chapter 7 or Chapter 13 bankruptcy. If you qualify, these professionals will guide you through every step of the process to help you achieve a viable solution. Visit this firm online to learn more about their services, or call (251) 342-0264 to discuss your case with a bankruptcy lawyer.

Disclosure: No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.