If you are facing financial challenges, it is always a good to analyze the options you have to manage debt.  Debt Consolidation and Bankruptcy are two of the strategies to use when looking for debt solutions.   Below we outline these two strategies so you can understand them better.

Debt Consolidation

Debt consolidation consists of a company negotiating with several of your creditors to try to obtain a lower payoff and lower payments.  However, there is no guarantee and nothing in the law that requires creditors to forgive any portion of your debt.  In many cases, people who enter into these types of agreements with debt consolidation companies end up owing more money than they did before and face lawsuits from their creditors for the original debt plus interest plus attorney’s fees.

If you decide to use debt consolidation you must be careful when looking for a debt consolidation company, there are a lot of unscrupulous companies that promise debt forgiveness but only put the debtor in a worse position. From the tax point of view, the IRS may determine that the money saved opting for this choice is considered income, meaning you will be required to pay taxes on.   However unlike bankruptcy, debt consolidation is not a matter of public records. It may show up on your credit records but not necessarily lower your credit score

Is Debt Consolidation the solution for you?

This is not the only solution you can use to manage your debt, but it may offer you a good solution to lower monthly debt payments.


Bankruptcy is a process that allows someone with a difficult financial situation to resolve some or all of the debt under protection of the Federal bankruptcy court.  It is federally regulated to protect debtors, in some cases no payments will be due to any creditor. Generally we could say that the option are liquidation and reorganization of the debt. Depending on the modality chosen the bankruptcy solutions could be:

  • The discharge of the unsecured debts
  • The reorganization of the secured debts
  • Keep or retain valuable exempted assets
  • Extend the payments of debts that are non-dischargeable
  • Obtain a fresh start

Declaring bankruptcy offers protection against creditors, it wipes the slate completely clean, once the debt sources are eliminated, you can start clean again and you can begin rebuilding good credit.   In Florida, with the FHA program those who file bankruptcy can obtain a mortgage in as little as 12 months.

Every debt solution choice has it pros and cons, the right choice would depend on your actual financial situation and goals. The most appropriate action to do is to consult with an experienced attorney, who can help you to make the right decision.

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