Chapter 7 used to be an easy and advantageous way to eliminate credit debt. However new laws passed in 2005 have made it harder for consumers and small businesses to file for bankruptcy.
With the new restrictions, many consumers have turned to debt consolidation for help, as this financial option may help significantly lower outstanding credit payments.
Debt consolidation may be a way to eliminate debt and avoid bankruptcy, allowing individuals to replace multiple monthly bills in favor of a single new loan at a fixed interest rate. Consolidation also offers the option to secure the loan against an existing asset, allowing for an even lower rate.
When nearing bankruptcy, the debtor may agree to buy the debt at a discount, accepting a lower payment through consolidation. By consolidating and collateralizing loans, consumers may be able to exit debt faster than with other types of services. Consolidation may even help consumers reduce monthly payments by between 30-50%.
In addition, debt consolidation can be beneficial to college students, as it may be a good way to repay college loans and save on interest rates.