Bankruptcy Vs. Debt Management Plan
Bankruptcy and debt management are two options for dealing with debt; each has its own unique advantages and disadvantages. Which one you should choose depends upon your individual needs and financial circumstances.
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Definition
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Bankruptcy is a legal process in which debts are restructured or erased completely. Debt management restructures debt to make it more manageable.
How It Works---Bankruptcy
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You present the court with a list of your debts and assets. After mandatory credit counseling and a meeting of creditors, your bankruptcy is discharged and your debts are relieved.
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How It Works---Debt Management
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Debts are consolidated into a single monthly payment and distributed to creditors through a third-party debt-management company.
Pros and Cons of Bankruptcy
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Bankruptcy eliminates debt and offers a fresh start, however, it will destroy your credit rating.
Pros and Cons of Debt Management
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Debt-management plans can save you money in interest and fees, but it can impact your credit negatively, as most debt-management plans require that you close the accounts included in the plan.
Which is Better?
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Bankruptcy is best for those who have significant debt and few assets or means to pay. Debt management is best for those who need assistance in handling their debt load.
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References
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