The question whether bankruptcy is better than debt consolidation is an often discussed one and is highly controversial. When considering ways of getting out of debt, you will come across several choices, two of which are bankruptcy and debt consolidation. To know which is best for you, you ought to study the pros and cons of each and see which one fits your situation best. That will be the one for you.

Let’s get a closer understanding of each of these options:

Debt consolidation: You generally go in for a debt consolidation loan that can be paid in the long term. It is a really good solution for you as you save a lot in interest and on the late fees negated with this. All you need pay is an amount that is perfectly affordable. This puts you in a much better position than having to declare yourself bankrupt.

A debt consolidation loan puts all your individual unsecured debts on your credit cards into one loan. So, instead of paying individual amounts to several creditors each month, you pay into one account. Since your debt consolidation agency negotiates on your behalf with your creditors, the amount that you finally pay is far reduced. The benefit you get is to pay a smaller amount affordably and much faster too. This also helps your credit rating improve.

However, to qualify for a debt-consolidating loan, you should be able to prove that you can pay promptly. This is best done by proving your source of income—whether a stable job or a rental income. Lenders usually ask you to put down some security, such as a house or car.

Debt consolidation, however, comes with a possible drawback—while it helps you pay all your debts on your various credit cards, you might be so happy and relieved that the worst is behind you, that you might well get back into overspending on your credit cards and land in the same mess again.

Bankruptcy: If you’re deep into debt and just don’t qualify for a debt consolidation loan and cannot afford other debt relief options such credit counseling or debt settlement, your best solution may be bankruptcy. Your financial condition determines whether Chapter 7 bankruptcy or Chapter 13 bankruptcy is best for you.

If you file for bankruptcy, you are completely discharged from some types of debts. This means that you don’t have to pay certain debts, though you do have to give up secure assets like your home and any others that you might have. Gone are the days when declaring yourself bankrupt was a matter of utter shame. Today, it has taken the form of a strategy for debtors to come out of debt. True, bankruptcy does remain on your credit history for seven to ten years, but there is a bright side to it now.

Bankruptcy is not a blanket strategy for all kinds of debts, such as child support or student loans. Neither debt consolidation nor bankruptcy offers a remedy to everyone. It depends on how deep you are in financial trouble.

So, if you’re keen to know which is better for you, you will have to consult a financial expert who will study your particular problem and then decide which option suits you best.