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Typically when a person is struggling financially, they explore all the options available to them before considering bankruptcy. Many times for these people the promise of debt freedom through consolidation seems like a viable option. However, when considering what your debt is actually costing you, especially for those struggling later in life, it may be a better option to file Chapter 7 bankruptcy. By doing so, you may be able to focus on retirement rather than giving up valuable income to a consolidation plan that may still damage your credit.

Debt consolidation is not always the less damaging option for individuals struggling with debt. Through consolidation, a person’s unsecured debts are lumped together and negotiated on to create a smaller, more manageable payment for the debtor. The debtor is essentially settling their debts for less than they owe. However, they may not benefit from the settlement since the consolidation company makes their money by charging a fee for managing the payment plan.

While many people think that consolidation is not as destructive to their credit as bankruptcy, they should consider the period of repayment as one long credit and income drought. Sure, they are paying back their debt but for the three to five years it takes them to do it, their credit is damaged, and they still are not debt free. The consolidated payment may be manageable but it isn’t gone, and income that could go toward a credit building secured credit card or retirement account is being eaten up by a the consolidation payment.

Struggling individuals might be concerned about how bankruptcy or consolidation may impact their retirement. Depending on their age, it may be a better choice to take whatever amount a consolidation payment would be and put it into a retirement account. It may not save their credit, but neither does consolidation. And with their new debt free life, they can focus on not only retaining their income but making it work for them. Bankruptcy is not for everyone, but for individuals looking for a fresh start contacting a bankruptcy attorney can help.