Debt Consolidation Vs. Bankruptcy: Which Should You Choose?

A woman speaking on the phone at a coffee shop

TL;DR: Debt consolidation and bankruptcy are two options for debt relief available to you.

  • Bankruptcy involves discharging or restructuring all your debts—but it stays on your credit report for seven to ten years. It’s generally considered a last resort when no other debt relief options are available.
  • Debt consolidation means consolidating multiple older debts into a single new loan. You will still have debt, as you need to pay off that new loan now, but consolidation may help you minimize late payments and other fees incurred from multiple loans.
Find a Debt Consolidation Loan

Which debt relief option is right for you depends on numerous factors, but we’ve gathered together the information you’ll need to help you make the best choice for you.

Still confused? Ask Tiff: What Are My Debt Consolidation Options?

Bankruptcy is a legal restructuring of your debts. When you file for bankruptcy, the court considers your debts and your income. Depending on the type of bankruptcy you file, you may need to submit a plan for paying back some of your debts. However, the end result of finalizing the bankruptcy process is that all the debts you entered with are considered discharged.

  • Filing for Bankruptcy: Chapters 7, 11 and 13
  • How to Rebuild After Bankruptcy

Whether you file Chapter 7, 13 or 11, if your bankruptcy is successful, you can start with a “clean slate” as far as what you owe. However, you don’t start with a clean slate with regard to your credit score. The late payments and issues leading up to the bankruptcy may still be reflected on your credit history. The bankruptcy itself will also stay on your credit report for a number of years.

consolidation has pros and cons.

debt consolidation loan or a balance transfer credit card. That means you need to be able to qualify for the credit, which can be difficult if you’ve been late or payments or have collection accounts on your credit report. It also means that you still owe the same amount.

Debt Consolidation Loans

However, when you consolidate, the new debt is just that. It’s new. It’s not in collections and you’ve now paid off the old debt, so it can show up as paid in full on your credit report. If you continue to make payments as agreed upon on the new debt, you may see your credit score increase over time.

Looking for other options? View our guide on how to choose a debt relief service.

Curious how debt relief options affect your credit? Discover everything you need to know about debt relief and your credit score.

balance transfer card.

Balance transfer cards typically come with low introductory APR offers. You can transfer existing balances to the new card and not pay interest on it for a certain amount of time—sometimes for a year or two. That lets you make payments on the balance and pay it off faster and cheaper. Balance transfer cards aren’t always the right choice, but if you find the right one for your needs, it can help you get a handle on debt without drastic financial choices.

See our expert guide: Balance Transfer Credit Cards

If you’re not dealing with credit card debt or don’t want
to open another credit card account, then you might consider a debt
consolidation loan. These loans let you convert your debt to a single loan,
which makes managing your financial life that much easier.

Whatever debt relief option you choose, has
your back. Sign up for our Free
Credit Report Card to keep track of your finances and additional tips and
tricks for improving your financial health.

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Home Decor Projects for When You’re Snowed In

Sometimes it’s hard to see the upside of harsh winter weather, especially when snow storms leave you stuck inside. However, you can take advantage of a snow day by using the opportunity to improve your home decor. Here are some simple DIY projects for when you’re snowed in. Ask your children to help out (safely) for family fun time that may add a bit of luxury to your living space.

Decorative Lampshade
Add some pizzazz to a lampshade by gluing an inlaid paper cutout on its inner surface. Use a blade to cut a design from paper (either freehand or from a template), making sure to place a rubber mat down first to protect the surface underneath. With a mixture of 50% glue and 50% water, decoupage the paper cutout inside of the lampshade. Once it’s dry, turn the lamp on and admire the glowing design!

Fabric Wall Art
If you have some bold print fabric, use it to create art that pops. All you’ll need to buy are wooden frames of varying sizes and a hot glue gun. Cut the fabric wide enough so that there will be two inches leftover when stretched across a frame. Cover, glue, and voila! Create a gallery wall to display your new pieces.

Hanging Planters
If you have small planters in your indoor garden, consider hanging them for a fun look that will free up surface space. Simply drill two small holes close to the top edge of the planter. Make sure they’re exactly opposite from one another. Knot a thin but sturdy rope or twine inside each of the holes so you can hang them from a hook. Tip: Install the hook near a window so your plant can still get the sunlight it needs.

Memory Table
Memory tables are a great way to personalize your home. You’ll need a deep photo display and a similar sized coffee table. Using a strong wood glue, adhere the back of the photo display to the table. You can now place objects in the display to create a sentimental scene. Try using objects that are cohesive, such as trinkets and photos from a memorable family trip. You may want to glue the objects in place so they are not disturbed when the table is moved.

If you keep one (or more) of these projects in mind for your next snow day, getting snowed in might not seem so bad!

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