When Do You Really Need Debt Consolidation?

Financial advisers and legal representatives will tell you that if you are deep in debt, you just need to see a debt consolidator and not file a Chapter 7 bankruptcy. Most people go for bankruptcy thinking that the proper liquidation of their assets could pay off all their bills. So when do you really go for debt consolidation instead of bankruptcy? Here are a few things to ask yourself.

1.     Debts with Capability

Let’s say 60% of your income goes to your debt repayments, utility bills and taxes and you still have a stable job. You don’t need to file for bankruptcy. Debt consolidation works great in this case. If you still have the capability to gain income and pay your bills, but you just need more monetary allowance to better your finances, debt consolidation is the key.

2.     Business-Related

A business’ sudden exit in the industry could cause great fluctuations in the local market and proper bankruptcy and distribution of payments to creditors is the key. A chapter 7 bankruptcy for businesses means the liquidation of assets sold by a trustee and then all debt repayments from the liquidation sent to the creditors. Business related debts expecting low to null growth will need bankruptcy than debt consolidation.

3.     High-Interest Debts

Some people have very many high-interest and unsecured debts but still have the physical and mental capability to earn a living. Debt consolidation is the answer for these people. Debt consolidation compiles unsecured debt with collateral and a single repayment scheme with a reduced amount to lower the debt’s interest rates, shortening the time needed to repay the debt.