While many people choose bankruptcy to put an end to collection calls and late fees, a wiser financial choice would be to consider consolidating your debt while you are still able to make your credit card payments.

The Benefits of Consolidating Your Debt
How do you benefit from consolidating your debt? By consolidating your debt into one monthly payment, you greatly reduce the risk of incurring late charges and additional interest. With only one payment and due date to keep track of, your bill paying is simplified.

When you consolidate your debt, you will pay a lower interest rate. You may be paying over 20 percent interest on some of your credit cards. Part of the process of debt consolidation is negotiating a lower interest rate. After debt consolidation, you may find that your interest rates have been cut in half.

Who Should Consider Debt Consolidation?
Many people are able to maintain a sizeable amount of credit card debt, making the minimum monthly payments, for years. This is a very risky way to manage finances. Through no fault of your own, you may find yourself suddenly unable to make your payments, and you will find that those monthly minimums have done nothing to reduce the amount of money that you owe.

Another common problem is the inability to acquire new credit when an emergency strikes. For example, your house needs the roof replaced, or your car’s transmission blows. When you try to apply for credit you will find that your outstanding credit card debt may prevent the bank from loaning you money.

Of course the worst possible scenario involves the loss of a job or a medical condition that puts a temporary halt to your cash flow. In a case such as this, it is important to act quickly to consolidate your debt and make repayment arrangements that you can afford or you may find yourself with no choice other than declaring bankruptcy.

Why Avoid Bankruptcy?
Many people may question the drawbacks to declaring bankruptcy. Some people have the mistaken notion that bankruptcy is the perfect way to start with a clean slate. Unfortunately, this is just not true. Bankruptcies are a matter of public record, and are documented on your credit report. There will be no fresh start, either financially or socially. In addition, many companies conduct credit checks as part of the pre-employment screening process, and many home and apartment rental companies check your credit record before allowing you to sign a lease. Having a fresh bankruptcy can be extremely limiting and can greatly affect your quality of life.

In addition, you are very likely to lose some things that you care about in a bankruptcy. While you are typically permitted to keep your home and car, as well as some personal items, the court may very well expect you to liquidate some assets. When you go through the bankruptcy proceedings, you may be asked to sell these things to pay off creditors.

Clearly, bankruptcy should be your last choice. Debt consolidation can give you a realistic way to pay off your debts, strengthen your credit, and help you achieve your financial goals.