For many Americans, debt is a stressful part of everyday life. Here in South Carolina and elsewhere in the nation, debt levels are on the rise, particularly when it comes to unsecured debts like credit card debt and medical debt. For some people, consolidation might be enough to handle debt, and for others, a Chapter 7 bankruptcy filing may be the more fiscally responsible bet.
It is important to understand the difference between the two. Debt consolidation essentially means rolling several different debts into one, in order for the debtor to be able to pay a single monthly payment instead of reporting to multiple creditors. Personal loans, home equity loans and balance transfer credit cards are all useful tools in consolidation. A consolidated loan typically also has a lower interest rate, allowing the debtor to pay down the outstanding amount more quickly.
Chapter 7 bankruptcy is somewhat different. It is considered a “liquidation” bankruptcy, which means a debtor may be required to sell off (or liquidate) some of their assets to pay down their debts. Some assets are considered exempt from sale under law, while other debts can be discharged by the court. In order to file for bankruptcy, an individual’s monthly income must be below a certain state-set level, and their disposable income must not be enough to pay down their debts.
Obviously, each option has its pros and cons. South Carolina residents in debt trouble are encouraged to further educate themselves on the options available to them, from consolidation to Chapter 7, before deciding on the path that is right for them. The help of an experienced bankruptcy attorney can be vital in clarifying this often-complicated process.
