What is the difference between bankruptcy and debt consolidation? - Brigham City Bankruptcy Lawyer

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In this video, Corey discusses the difference between bankruptcy and debt consolidation.

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Brigham City Bankruptcy Questions and Answers

What is the difference between bankruptcy and debt consolidation?
You might be thinking, should I do bankruptcy or should I do debt consolidation? Here's what I'm going to tell you, I'm going to tell you the textbook answer and I'm going to tell you my own thoughts on the matter.
The textbook answer is debt consolidation is working directly with creditors, typically through a third party who goes to those creditors and says "okay we've got a pool of money here and we can only give so much to everybody". That's the essence of debt consolidation. Sometimes they give you a new loan and other times they don't and they're just saying "pay in to this big pot and then we'll pay all your creditors for you".
My personal opinion, I don't like it. I don't. Here's why:
You can do the same thing yourself. You can reach out to those creditors. Using that third party does not give you any power or leverage with those other companies or those creditors, even if they tell you otherwise. I don't care what they have to say. Bottom line is they don't have any special influence.
Here's the other thing you need to be really careful of, a lot of times those third parties are actually the collection arm of the creditors -- one of the creditors or a lot of the creditors. Sometimes they're in bed with the enemy and they just don't quite represent it to you that way. So what you're doing is you feel like you've got the advocate but you really don't.
I just look at it this way, I always make my decision based on risk vs. reward. Here's the bottom line with debt consolidation vs. bankruptcy. With debt consolidation you get all the downside of a bankruptcy. It affects your credit exactly the same way as doing a Chapter 13 bankruptcy. If you hear otherwise from these third parties that do these, why do you think they're telling you that? Because they want you to choose what they sell.
Here's the bottom line. When you go into those arrangements with your creditors they report to the credit bureaus that you're in an arrangement where you're paying differently than what you agreed to originally. That impacts your credit score the same way that a Chapter 13 does. But you don't have any of the protection that the bankruptcy gives you through the law. Your creditors, at any point and for whatever reason, can change their mind and say "we're not going to do that anymore, we're not going to accept those terms anymore". You're not protected in those plans.

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