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Which Has Legal Chops - Debt Consolidation or Chapter 13 Bankruptcy?

With the deteriorating state of the economy, ads for debt consolidation are popping up everywhere. You see them on television, on the internet, even on the spine of the telephone directory. Debt is a huge problem, and more and more folks are looking for help in straightening out their financial situations.

You may be seriously thinking of contacting one of the agencies offering debt consolidation assistance. However, you may also have heard a bit about Chapter 13 bankruptcy, and wonder which might be the way to go. Here are some points that highlight the differences between the two, so you can make an informed decision.

Chapter 13 is a legal process that is a form of debt consolidation. However it offers things that debt consolidation services cannot. The biggest and most important is that it packs a mighty punch. If you choose bankruptcy protection you are choosing a service that is backed up the Federal Bankruptcy Code.

You will be pleased to know that you are protected immediately from foreclosure, repossessions, creditor harassment, license suspensions, and the horror of bank account garnishment. It's like a heavy door swinging shut on any recovery attempts that have been initiated by a collection agency, or anyone else. Called a Bankruptcy Court Injunction, it's a court order backed up by the legal system that consolidation companies cannot offer.

If you can meet certain qualifications, you may only be required to pay as little as ten percent of any unsecured debt. This means that 90 percent can be completely eliminated, leaving you very little principal to pay off. Debt consolidation companies cannot hold your creditors to such a strict schedule, they can only get balances and interest rates lowered, not eliminated. With such a huge reduction, you'll be able to see the light at the end of the tunnel much earlier than you thought possible.

Would you like to have protection from every one of your creditors? You can benefit from having only one monthly payment which will include things such as car payments, mortgage arrears, tax debt and child support arrears. Most debt consolidation firms only allow certain debts in the repayment plan, and not others.

You can take care of your important secured loan debts first, right when your bankruptcy plan is concluded. The things that matter to you most, your mortgage and you car payment and other important claims will be paid before such things as medical bills and credit cards. If you go with a consolidation company, you may have to pay penalty charges if some creditors are not included in the initial payout. Of course they will continue to charge you interest while they wait for everything to be wrapped up.

Your property will be protected under Chapter 13, and the bankruptcy will proceed even if you cannot afford the proposed monthly payments. You won't need to risk losing your house and property as the demanding debt consolidation firms tend to force you to do.

You'll be able to get on with your life sooner, only waiting from three to five years for all debts to be eliminated. Don't settle for traditional consolidation that leaves you struggling with high balances that drag on seemingly forever, all the while accumulating more finance and interest charges.

If a creditor fails to file a proof of claim with the Bankruptcy Court, you will never have to pay. Yes, it's true. Even if they are listed in the bankruptcy file, but somehow the appropriate paperwork doesn't get done, they are eliminated from the proceedings. This scenario happens all the time, and even if they come back and try again after the repayment plan is completed, their claim will be ruled invalid.

Unlike the debt consolidation process, late charges and interest will not accrue to debts that existed before bankruptcy is filed. In most cases the payments you make on your unsecured debt will be applied directly against the principal. This is not the usual way that regular debt consolidation works. Chapter 13 takes no interest or late charges. Imagine how much quicker it will be to replay your obligations.

You'll also have great support. Your attorneys will be working for you and your best interests. Sometimes debt consolidation companies are privately owned and operated, so their interests will come before yours. There have even been instances where the consolidators are sponsored by the very companies you owe money to. Talk about being left out in the cold.

On top of everything, you will enjoy peace of mind, knowing that your attorney has a legal and ethical obligation to energetically champion what's right for you.

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