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When debt consolidation is the best decision

Debt consolidation may be ideal for those who are looking for a way to better manage their finances. However, Kentucky residents should understand that it may not resolve their issues as it relates to why they got into debt in the first place. Ideally, people who are pursuing debt consolidation will have a plan to stop using their credit cards or otherwise accumulate more debt.

Those who want to make the most of debt consolidation will ideally have debts totaling less than half of their yearly income. They should also be able to pay off the debt in less then five years. If neither of these things are true, an individual may be best served filing for bankruptcy. Debtors who don't have good enough credit to get a personal loan or a zero percent interest credit card may also benefit from bankruptcy compared to debt consolidation.

When debts are consolidated, it will generally allow a person to pay off credit cards and other loans with one monthly payment. Furthermore, it will allow an individual to pay off that debt at a lower interest rate. Examples of debt consolidation include credit card balance transfers or using a home equity loan. However, home equity loans may put a person at risk of losing his or her home if payments are not made.

Filing for Chapter 7 or Chapter 13 bankruptcy may make it possible for a person to regain control of his or her finances. In general, creditors are not allowed to contact debtors while their bankruptcy case is still open. An attorney can describe some of the other benefits.

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