Debt Consolidation vs. Bankruptcy: Which One Is the Best Option?

In the times of monetary disorder, debt consolidation and bankruptcy seem to be an easy way out of unmanageable debts. However, both of these debt management strategies have their own advantages and disadvantages. People who desire to protect their credit rating and save their money support debt consolidation loans. While bankruptcy seems to be the only choice for people who want to restructure or eliminate their debts by appearing in a federal court.

Take a look at this guide that describes the various aspects of both bankruptcy and debt consolidation.

Debt Consolidation

When you consolidate or combine all your debts into one single debt, you organize your various debt payments into one payment. All you need to do is find a reputable firm, which you can shortlist by looking over debt consolidation and debt settlement review online.

# Benefits and Setbacks of Debt Consolidation

  • Safeguard your credit score: Unlike bankruptcy, debt consolidation plans are not subject to public record. Anyone can approach a credit counselor and learn about your bankruptcy.
  • Keep access to credit: A typical debt consolidation agreement mostly allows you to keep your credit cards, which is extremely helpful in cases of an emergency. But, if you are in a default scenario where you owe a large amount of money, you might not get an additional credit.
  • Simplify your debt payments: When you go for a debt consolidation plan, you can greatly improve your debt payments, as they come in monthly payouts at lower interest rates.

The only major pitfall of debt consolidation is that you can lose your property if you use your home or vehicle as collateral. However, this can be avoided if you stay disciplined with your monthly payments.


Through bankruptcy, you get a chance to eliminate or restructure specific debts under the protection of the federal court. There are many types of bankruptcy cases that are filed among which Chapter 13 and Chapter 7 are the most common ones. While a chapter 13 bankruptcy approves you to restructure your debts, you can eliminate it with a Chapter 7 bankruptcy.

# Advantages and Drawbacks of Bankruptcy

When compared with debt consolidation, bankruptcy has only two great advantages over it. First, you can avail the opportunity to completely wipe your debts, and the second is that you will not lose your property. However, it has many drawbacks compared to debt consolidation:

  • A Chapter 13 bankruptcy reflects on your credit report for 7 years, while a Chapter 7 bankruptcy remains on your credit score for around 10 years. Either option will deteriorate your credit score, and prohibit you from applying for other loans.
  • You may not qualify to file for bankruptcy in court in case your income is too high or too low.
  • A bankruptcy filing is not free of cost. Legal fees can really hurt your pocket bad.


Therefore, if you want to save money and meet your high priority needs instead of making your debts a matter of public record, debt consolidation is the best option for you. Find a reputable firm that will offer you the desired services for improving your situation.

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