Vance P. Truman, Attorney at Law
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Chapter 13 and debt consolidation: similar and yet so different

One of the options that many people will discuss and be told about when they are in a difficult financial position is debt consolidation. This involves taking out a loan to cover all of your other debts. The problem with debt consolidation is that there are dangers that lurk in the details of this process.

For example, there are significant tax implications for choosing debt consolidation. Also, credit card companies actually have the option to not participate in your plan to consolidate your debt. As if that isn't enough, there is also a chance that not all of your debts are completely or sufficiently discharged through the debt consolidation process. As such, you could still have financial problems when the process is over, and it could be difficult to rebuild your credit in the aftermath.

Chapter 13 offers a similar approach to debt as debt consolidation -- but Chapter 13 offers significantly fewer drawbacks. Restructuring your debt is the main goal of Chapter 13 bankruptcy. It forces all of your creditors to participate, and it can offer you a clean slate at the end which can entice creditors to lend to you again.

Of course, the bankruptcy will remain on your record for some time, and your credit score may not be what it was. But when you consider structured, achievable approach to debt relief that a Chapter 13 bankruptcy filing offers, it is understandable to choose the bankruptcy route. If you need help with your debt problems, consult with an experienced bankruptcy attorney.

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