In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property.After you have made all the payments under the plan, you receive a discharge of your debts.Debt consolidation services work as the middleman between the debt owner and the creditors, contacting the creditors and requesting reduced payments so that the debt owner can begin paying off money that is owed.Filing for bankruptcy, on the other hand, is a legal process during which you block creditors from your finances as you attempt to re-establish yourself financially.A Chapter 7 filing requires that you liquidate all but a few assets, such as a home and work-related assets.A Chapter 13 filing requires that you begin reorganizing your assets and paying off debts within three to five years. Debt consolidation services work quietly behind the scenes to help debt owners get a handle on their debt.
There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, that you might otherwise lose.Banks, private lenders and other financial institutions offer consolidation loans.The loans offer advantages and disadvantages to people who want to pay off debt. As a result, it can be difficult to figure out how to begin dealing with debt, given the various–and often confusing–options that are available.Of the two, bankruptcy and debt consolidation offer significant benefits, as well as decided disadvantages.