Which is better, bankruptcy or debt consolidation is a common question asked by the people who are under huge debts. Even it is a common puzzle that baffles the general people with less financial knowledge. There are many kind of programs available in the market like debt consolidation loan, bankruptcy, debt settlement, credit counselling program etc. which can save a person from debt burden. But the most popular of them are debt consolidation and bankruptcy and people try to find among bankruptcy and debt consolidation, which is better. Lets talk about both the options to have a more clear idea about the best.

Lets talk first about debt consolidation and then are going check out the bankruptcy option.

Debt consolidation:

• Debt consolidation loan is the process of taking a single loan as replacement of all the unsecured loans (Credit card debt or other debts) issued in your name and save yourself from making numerous payments. As the debt consolidation loan is of lower interest rate than the unsecured loans that’s why you can save your hard earned money in this process. The debt consolidation also can improve your credit score if you be able to pay off your debts. But for getting this loan you have qualify first and should have a steady source of income. The lender can ask for a security or a co-signer before issuing the loan, so its not at all easy for the people without stable income source to get such a loan.

• Many people also of the view that its not at all good to take another loan to pay off your existing debts. They think they are only inviting troubles by applying for this loan and increasing the debt burden. They are of the view that they are not being able to eradicate the debts and so this is not atall a solution. But for some this is a great solution from their debt burden.

Now lets look into bankruptcy to decide Which is better, bankruptcy or debt consolidation.

Bankruptcy:

• Bankruptcy on the other hands can discharge you from the debt burden. You can be out of debt but for that you have to surrender your home and all other valuable assets. But the bankruptcy can dampen your credit history and the bankruptcy stays 10 year in your credit history and make it difficult to have future loan or other finances. But when you are in liquidity crunch and have very little income then bankruptcy is a preferred way for them. Many people have filed their bankruptcy during the recession period to save them from debts.

• There are two options of bankruptcy available chapter 7 and chapter 13. Every option has its good and bad sides which we will discuss in future. But bankruptcy is not also be able to free you from all types of debts. There are some types of loan like student loan, child support loans etc. that can haunt you even if you have been declared bankrupt. So its neither bankruptcy nor debt consolidation can be declared best and only the recipients financial condition can dictate which option is better for him.

Lets Decide by ourselves Debt consolidation or Bankruptcy

When a person has stable income to pay off all his debts in future then he should opt for debt consolidation and if he is jobless or without steady income, then he has to opt for bankruptcy. So it is better to analyze your economical condition first and then only decide with proper judgment to choose the right option. I always prefer to ask any financial expert to help me in deciding which is better for me, Bankruptcy or debt consolidation?