Bankruptcy vs. Debt Consolidation

In recent years, as more and more people find themselves in debt, companies that are calling themselves "debt consolidation agencies" are popping up all over New York and the United States. These agencies are promoting debt consolidation as an effective way to negotiate debts down to manageable amounts and pay off those debts over a period of time.

Unfortunately, some of these companies are fraudulent and even the ones who are not fraudulent may not be able to provide the debt relief that you need.

As an alternative to bankruptcy, debt consolidation does not have many benefits but it does have several disadvantages that could harm you in the short term and the long term. At the law offices of Nathan Erlich, P.C., we can help you understand the difference between Chapter 13 bankruptcy and debt consolidation and provide advice that fits your individual needs.

Contact our firm to schedule a free initial consultation with an experienced lawyer and learn more about your rights.

The Benefits of Chapter 13 Bankruptcy Over Debt Consolidation

Chapter 13 bankruptcy, which allows a person to pay off credit card and other forms of debt over a period of time, is different from debt consolidation, and understanding the advantages of bankruptcy is important for your financial success. These advantages include:

  • Filing for bankruptcy will stop foreclosures, repossessions, wage garnishments and creditor harassment through an "automatic stay". Debt consolidation has no such power to stop these collection activities.
  • Most debt consolidation programs will not include tax debt, mortgage payments or car payments. Chapter 13 bankruptcy can typically include all of these debts.
  • Chapter 13 bankruptcy can take from 3 to 5 years in length to pay off all unsecured debt. Debt consolidation can drag on for many years without lowering debt balances.
  • Any debts in a Chapter 13 bankruptcy will stop accruing interest and late fees. Debt consolidation will often require you to pay accumulating late fees and interest.
  • The terms of your bankruptcy and your rights are protected by U.S. law. It is much harder to enforce your debt consolidation agreement.

Many of these agencies will argue that a bankruptcy will do more damage to your credit than debt consolidation. While it is true that a bankruptcy will remain on your credit report, it is usually looked at more favorably than a person who continues to accrue late payments or has defaulted on home loans, car loans and other lines of credit.

Contact the Law Offices of Nathan Erlich, P.C.

Learn more information about debt consolidation vs. bankruptcy protection and how you can protect your rights. Contact our firm to speak with an attorney at our main office in Forest Hills, Queens by calling toll free at 877-518-7581.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.