Bankruptcy and debt consolidation are two common debt relief solutions. Bankruptcy is a legal process that relieves you of your debt obligations, whereas debt consolidation involves taking out a loan to consolidate your debts into a single monthly payment.

How can I consolidate my debt without bankruptcy?

There are several ways to accomplish this, including:

1. Enrolling in a credit consolidation program through a nonprofit credit counseling agency.
2. Taking out a debt consolidation loan through a bank, credit union or online lender.

How are debt consolidation loans handled in bankruptcy?

With Chapter 7 bankruptcy, you will receive debt forgiveness that may involve the liquidation of assets and other matters. Once you file for bankruptcy, creditors are not able to contact you to settle the debt anymore, since it is taken care of from a legal point of view.

How does debt consolidation help you save money?

Proponents of debt consolidation often promote this strategy as a simple way to save money and protect your credit rating. When you consolidate your debts, you reorganize multiple debt payments into one payment. You can choose to consolidate debt through a secured loan or an unsecured loan.

Is there an automatic stay on debt consolidation?

Debt consolidation is not subject to the automatic stay. An automatic stay is a federal court injunction that goes into effect the moment your bankruptcy petition is filed. It prohibits all collection actions against you, such as phone calls and collection letters.

Can a credit card company cancel a debt consolidation agreement?

Unless the debt consolidation agreement prohibits it, you can keep your credit cards, which might be helpful if an emergency arises. (In most cases, when a credit card company receives notice of your bankruptcy, it will cancel your card .)