Consolidating debt versus bankruptcy

Consolidating debt versus bankruptcy

Take the time to consult a qualified financial advisor and weigh all of your options.Every business and every financial situation is different--so before making the choice to consolidate your business debt, it's important to consider the ramifications of every available option.

Some debts may be repaid in full, some in part, or some may be discharged if the court agrees that repayment would create a situation of “undue burden.” According to the United States Courts website,, “The procedural aspects of the bankruptcy process are governed by the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court.” Therefore, the rules of bankruptcy vary a bit from state to state.Debt consolidation entails taking out one loan in order to pay off multiple debts.Debt consolidation usually involves taking out a low-interest secured loan – which involves offering up collateral against an asset, such as a house — in order to pay off unsecured debts with higher interest rates.Ultimately, the goal of a business debt consolidation loan is to make your company's debt situation more manageable by reducing the amount of creditors you're dealing with as well as lowering the amount you pay daily or monthly (which improves your overall cash flow). If you think a business debt consolidation loan may be the right solution for your company's current debt situation, you can choose from a number of for-profit debt consolidation companies to broker your new loan.If the new business debt consolidation loan agreement doesn't achieve both of those goals, it likely isn't a worthwhile solution for your situation. The consolidation company is responsible for negotiating the new loan on your behalf, collecting payments from your business and paying off your previous creditors.

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So before you apply for a business debt consolidation loan, it's important to do the math for your particular financial situation and make sure you're getting a good deal.

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