For many poor credit and financially harassed individuals, debt consolidation is one of the major stopgaps against bankruptcy. Ideally, you want to utilize any legal means necessary to avoid filing for personal bankruptcy, since your credit rating will remain very bad for many years afterwards, and you may face other long term tax and credit headaches as a result of your filing. Moreover, you may have to sacrifice some of your personal assets in order to partially pay back your creditors.

Debt consolidation for people with bankruptcy offers you an interesting way to salvage your credit and to deal with your creditors in a constructive way. Right now, you likely have many different bills and notes out to competing lenders, such as credit card companies, banks, and private institutions. These different accounts all charge you different rates for the privilege of continuing to borrow the money.

If some of these rates are variable, you may have a hard time juggling how much interest to pay per month and how to get to the bottom of your balance so you can eliminate/discharge your obligations.

A debt consolidation loan provides you money now to eat into your debt. You can tackle your debts one by one or all at once. There is a large logic to working through your debt consolidation program systematically. If you can turn over one debt, you may be able to lower your credit rating and thus lower your overall interest rate payment per month. Thus, each debt you dispatch will be easier. Of course, if you have multiple severe outstanding debts to attend to, it may be worth the hassle to pay down as much debt as you can right away.

Often, debt consolidation loan applicants are so excited at the prospect of having funds to manage that they lose sight of financial prudence. If you spend all of your consolidation money taking care of past obligations, you may find that your pockets are empty, and you may soon start charging your credit cards to buy daily necessities, thus beginning the cycle all over again, only this time saddled with long term debt consolidation loans to pay off.