Bankruptcy and debt management are two options for dealing with debt; each has its own unique advantages and disadvantages. Which one you should choose depends upon your individual needs and financial circumstances.
Definition
Bankruptcy is a legal process in which debts are restructured or erased completely. Debt management restructures debt to make it more manageable.
How It Works---Bankruptcy
You present the court with a list of your debts and assets. After mandatory credit counseling and a meeting of creditors, your bankruptcy is discharged and your debts are relieved.
How It Works---Debt Management
Debts are consolidated into a single monthly payment and distributed to creditors through a third-party debt-management company.
Pros and Cons of Bankruptcy
Bankruptcy eliminates debt and offers a fresh start, however, it will destroy your credit rating.
Pros and Cons of Debt Management
Debt-management plans can save you money in interest and fees, but it can impact your credit negatively, as most debt-management plans require that you close the accounts included in the plan.
Which is Better?
Bankruptcy is best for those who have significant debt and few assets or means to pay. Debt management is best for those who need assistance in handling their debt load.
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