I had a potential client email me this question last week, and it’s complicated.
If you have the credit, income, and assets to get some kind of consolidation loan instead of filing bankruptcy, then it’s going to be much, much better for your credit. You won’t have the black mark of bankruptcy on your credit. Your multiple creditors will all be content as you begin repaying your one big creditor.
To be honest, I don’t know how many of my potential clients go this route and take out a consolidation loan that works. I don’t know because they never need to call me.
However, I have many clients who have attempted to take out a consolidation loan and were denied. I have some who took out a consolidation loan and then couldn’t make the payments. These are the stories I hear about.
In my experience, even if you can take out a consolidation loan, bankruptcy may be a better option to get your family back to zero instead of taking on a huge new debt. At a minimum, it would be a good idea to at least talk to a bankruptcy attorney and see what kind of options you have.