Many people are at the point with their finances that their options are limited. One thing these people are doing is looking into bankruptcy or debt consolidation. This can help to reduce the amount of monthly payments that have to be paid by consolidation or by liquidation. Bankruptcy or debt consolidation is only two options of an overall strategy in managing debt. Each has its merits as a good method of debt handling. By paying off several debts and paying one smaller payment, one can get out of a negative cash flow. But, if the new consolidation payment is too close to the total of the consolidated debts it may be unwise to opt for the consolidation.
The reason for either bankruptcy or debt consolidation is the fact that people who consolidate debts are often poor at money management. Often they open new accounts that put them right back into the same circumstance or worse. The reason for bankruptcy or debt consolidation is to reduce expenses not to enable even more debt. Many companies tout the benefits of debt consolidation as a miracle cure for money problems when it can create a bigger problem than if these debts were liquidated with a bankruptcy filing.
Good debt counselors know how to effectively make a decision about whether bankruptcy or debt consolidation is the best way to help manage debt. Sometimes there are advertisers who claim to be professional counselors that are not really legitimate. They are especially common on the internet. When considering bankruptcy or debt consolidation it is a good idea to check out who you are dealing with. If a company is very hard to trace it is probably a good idea to steer clear of them. Good research will normally weed out the frauds.
An important decision when considering bankruptcy or debt consolidation is whether or not it has to be secured with property such as home equity. If you take out a consolidation backed by equity, if something happens, you could lose your house. Also, you will have to pay this debt in order to keep your house. This means that the debts you wanted to cut out the payments on are tied to your house mortgage. With a bankruptcy, you can keep your house and eliminate the unsecured debts you need to consult a reputable debt counselor to develop a solid strategy that best suits your current and future financial profile.