Debt Consolidation vs. Bankruptcy

People who are struggling to pay their monthly bills may look for debt management options that may provide some financial relief. Many individuals who are reluctant to file bankruptcy because of the perceived costs and consequences of such filings may consider programs that allow them to consolidate their debt.

Debt consolidation involves multiple debts being refinanced into a single loan. While debt consolidation allows people to secure lower monthly payments without filing bankruptcy, many consolidation plans actually carry higher lifetime costs—and there may be serious consequences for consumers if they are unable to make payments.

Attorney in Cincinnati, OH Discusses Debt Consolidation vs. Bankruptcy

If you are struggling to pay bills every month and are considering debt consolidation to find some financial relief, it is in your best interest to first seek legal counsel. Steiden Law Offices can help you determine whether debt consolidation is truly the best plan for your unique financial situation.

Our Cincinnati bankruptcy lawyers have Ohio offices in Cincinnati, Maineville, and West Chester as well as locations in Covington and Florence in Kentucky. They can review your case and answer all of your legal questions when you call to schedule a free, confidential consultation.

Overview of Debt Consolidation vs. Bankruptcy in Northern Kentucky

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Advantages of Debt Consolidation in Ohio

One of the major reasons that people choose debt consolidation over bankruptcy concerns their right to privacy. Bankruptcy is a matter of public record while debt consolidation is typically a private agreement.

By consolidating debt, most people are usually able to secure lower monthly payments that help reduce their financial stress. Additionally, individuals who agree to debt consolidation also maintain access to their lines of credit—although this may lead to some people not changing behaviors that contributed to financial problems in the first place, and thus, possibly worsening some issues.

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Disadvantages of Debt Consolidation in Kentucky

Debt consolidation does not afford debtors that same type of legal protections they would get by filing bankruptcy. As soon as a person files Chapter 7 or Chapter 13 bankruptcy, an automatic stay will immediately end all collection efforts by creditors and prohibit any wage garnishment. With debt consolidation, creditor harassment may continue, and wages can still be garnished.

Bankruptcy also significantly reduces the amount of debt that a person actually pays back to the creditors. Most debt consolidation agreements allow creditors to recoup all or most of the amount that is owed because the balance is simply paid back over a longer period. Additionally, debt consolidation frequently involves many assorted fees.

Certain balances that are resolved through debt consolidation for lesser amounts may be treated as income by the IRS, meaning that there may be a tax liability for the debtor. If a debtor stops making payments toward his or her debt reconciliation, he or she may not only be at risk of losing whatever collateral was involved, but none of the payments made to the organization consolidating the debts will be used towards the original debts.

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Ohio Debt Consolidation vs. Bankruptcy Resources

Loan Consolidation | Federal Student Aid | U.S. Department of Education — Federal Student Aid (FSA) is an office of the U.S. Department of Education, and you can learn more about consolidating multiple federal education loans into one loan on this website. As the website notes, there is no application fee to consolidate your federal education loans into a Direct Consolidation Loan. You can find answers to frequently asked questions about Direct Consolidation Loans on this website.

The Fed | Consumer Credit | G.19 — The Board of Governors of the Federal Reserve System, more commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System that implements the nation's monetary policy. The G.19 Statistical Release, "Consumer Credit," reports outstanding credit extended to individuals for household, family, and other personal expenditures, excluding loans secured by real estate. G.19 data is released around the fifth business day of each month.

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Steiden Law Offices | Cincinnati Bankruptcy Lawyer

Are you thinking about debt consolidation to deal with credit card bills, medical expenses, or other monthly payments? Make sure you contact Steiden Law Offices, so you can have a full understanding of your financial options.

Our Cincinnati bankruptcy attorneys represent individuals in communities all over Hamilton County in Ohio as well as Kenton County and Boone County in Kentucky.

Call or fill out an online contact form to have our lawyers provide a complete evaluation of your case during a free initial consultation.

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Convienient Office Locations
Cincinnati, OH
830 Main St #401 Cincinnati, OH 45202
260 Northland Blvd #129 Cincinnati, OH 45246
Covington, KY
411 Madison Avenue Covington, KY 41011
Florence, KY
6900 Houston Rd #21 Florence, KY 41042
Maineville, OH
2263 W US 22 and 3 Maineville, OH 45039
4030 Mt Carmel Tobasco Rd #327E Cincinnati, OH 45255
West Chester, OH
8050 Becket Center Dr #131 West Chester, OH 45069