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Loan Consolidation or Bankruptcy

Produced by Mariah Jennings-Rampsi, South Coastal Counties Legal Services, with funding from American College of Bankruptcy
Created June 2012

Two other ways to deal with financial problems are:

  1. to “consolidate” your debt. To consolidate means to get one big loan to pay off all of your other loans,  or
  2. to file for bankruptcy.


Both of these answers have serious consequences. Talk to a lawyer before you decide to do either.

Loan consolidation

Credit card companies, banks and credits unions may offer to consolidate your debts with a loan.  That is, they will offer you one big loan to pay off all of the other smaller loans.  Be careful. In the end, you may pay more interest than you pay now.

Filing for bankruptcy

If you have a low-income and you are on disability your income is probably already “protected”. It is probably “execution proof.”  Filing for bankruptcy may not protect your income any more than it is already protected.

Bankruptcy can help you if your assets or income are worth more than the protected exemption amounts.  Bankruptcy has serious results.  Speak with a lawyer before filing for bankruptcy.  See the section on exemptions to learn if your income and assets are protected.

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You may be able to get free legal help from your local legal aid program. Or email a question about your own legal problem to a lawyer.

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