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Debt consolidation vs. bankruptcy: What’s the difference?

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Credit card debt consolidation and bankruptcy are two very different debt relief options. 

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If you’re dealing with mounting credit card debt, you may feel overwhelmed. After all, with several rate hikes over the last two years, there’s a high probability that your minimum credit card payments have increased

If you’re struggling to make your minimum payments, you may be thinking about debt consolidation or even bankruptcy as a way to get out of debt. But what are the differences between these two options?

Get in touch with a debt relief pro now to learn more about your options

Debt consolidation vs. bankruptcy: What’s the difference?

Credit card debt consolidation is the process of using either a loan to pay off your high-interest credit card balances or taking advantage of a debt consolidation service, also known as debt management, to help make your debts more manageable. 

Bankruptcy, on the other hand, is a legal debt relief avenue by which the courts can require your lenders to discharge your debt (Chapter 7 bankruptcy) or work with you to restructure your assets and debts (Chapter 13 bankruptcy). 

But those aren’t the only differences between these two debt relief options. Other differences between the two include:

The credit impact

The impact each option has on your credit is one big difference to note. For starters, bankruptcy can remain on your credit report for up to a decade.

“Filing bankruptcy is one of the most detrimental events for your credit score,” says Lamine Zarrad, CEO and founder of the credit-building tool StellarFi. “Additionally, filing for bankruptcy will remain on your credit score for 7-10 years.”

Debt consolidation, on the other hand, can also have a temporary impact on your credit score in certain cases. For example, debt consolidation programs may cause a temporary dip to your credit score due to account closures.

Or, if you take out a debt consolidation loan, the new account may lower the average age of your credit history, which could also cause a temporary dip. However, the impact on your credit generally won’t be as prolonged, or as severe, as the impact caused by filing for bankruptcy.

“On the contrary, consolidating your debt has the potential to increase your credit score, even if it causes a temporary dip,” says Zarrad. “It will dip from closing your extraneous lines of credit, but making your regular scheduled payments will help get your score back on track.”

Find out how much relief debt consolidation could provide today

The level of relief

When you take out a debt consolidation loan, you typically benefit from a lower interest rate and more manageable payments. A debt consolidation program typically results in a lower interest rate and payment term negotiations with your lenders. As a result, debt consolidation loans and programs may result in paying less in interest and getting out of debt faster than you would by making only the minimum payments. However, neither debt consolidation option results in your debts being discharged. 

On the other hand, bankruptcy may provide more relief. If you file for Chapter 7 bankruptcy, the court may discharge all of your eligible debts. (Some tax debt, debt as a result of malice and divorce settlements are typically not eligible for discharge.) If you file for Chapter 13 bankruptcy, the court will typically discharge a portion of your debt while restructuring the rest to make it more affordable based on your budget. In either case, bankruptcy usually offers a higher level of relief than debt consolidation. 

The cost

If you opt for a debt consolidation loan, the costs involved are typically the lender fees and interest you pay in the process. These costs vary by lender and are based on your credit score and borrowing profile. 

Debt consolidation programs, or debt management programs, usually charge a setup fee followed by a monthly fee for their services. For example, In Charge Debt Solutions charges an initial setup fee of up to $75 on average (depending on the state) and an average monthly fee of $33 for debt management services. 

The filing fee for bankruptcy typically starts at $338, according to Bankrate. Attorney fees will usually add between $700 to $2,000 or more to your total cost, but those fees can be higher. 

The process

The debt consolidation loan process is usually simple. All you need to do is apply, and get approved, for the debt consolidation loan and use the proceeds of the loan to pay off your credit card debts. You then make your regular payments on your loan according to the terms you agreed to. 

The debt consolidation program process is also relatively simple. It typically starts with a short conversation with a debt relief expert about your debts, your budget and what you can afford to pay each month. The debt relief service does most of the work from there, negotiating with your lenders and creating an effective payment plan. You then send in your monthly payments as agreed until your debts are paid in full. 

Bankruptcy, on the other hand, typically involves quite a bit of paperwork and regular communication with an attorney. Though most filers won’t have to appear before a judge, they are typically required to attend a meeting with their creditors. And, if you file Chapter 13 bankruptcy, you’ll probably be required to make payments toward your debt according to the court’s instructions.  

The bottom line

Credit card debt consolidation and bankruptcy are two very different debt relief options. Credit card debt consolidation may have a minimal impact on credit scores, typically offers relief from high interest rates and is relatively inexpensive. Although bankruptcy usually offers a higher level of relief, the credit impact can be significant and the process required is typically more involved. Moreover, bankruptcy may cost thousands of dollars in court costs and attorney fees. 



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Israel airstrikes rock parts of Lebanon as Hezbollah launch rockets at air base near Haifa

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The escalating fighting between Israel and Hezbollah continued Saturday as both sides traded strikes as the war in Gaza nears one year.

The Israel Defense Forces said its air force struck Hezbollah fighters inside a mosque in southern Lebanon that they said was used as a command center to “plan and execute terrorist attacks against IDF troops and the State of Israel.”

The mosque was adjacent to Salah Ghandour Hospital in the town of Bint Jbeil. The hospital said in a statement that Israeli forces had shelled it after being warned to evacuate. The shelling “resulted in nine members of the medical and nursing staff being injured, most of them seriously,” while most of the medical staff were evacuated. On Thursday, the World Health Organization said 28 health workers in Lebanon had been killed in the past 24 hours.

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A man photographs the rubble of a building leveled by an Israeli airstrike that targeted Beirut’s southern suburbs.

ANWAR AMRO/AFP via Getty Images


At the same time, 12 Israeli airstrikes hit Beirut’s southern suburbs, including one that badly damaged a large hall Hezbollah used to hold ceremonies, Lebanon’s state news agency said.

Later in the day, more strikes hit the area, from which tens of thousands of people have fled over the past two weeks.

Israeli airstrikes also hit areas in southern and eastern Lebanon, according to state media. At least six people were killed, according to NNA.

Meanwhile, Hezbollah said it launched a series of rockets at an Israeli air base near Haifa, about 30 miles from the Lebanese border. Israeli police said fragments of interceptors fell in several sites but no injuries were reported, according to the Associated Press.

Israel has sharply expanded its strikes on Lebanon in recent weeks after nearly a year of exchanging fire with the Iran-backed Hezbollah — long designated a terrorist organization by the U.S., Israel and many other nations. The IDF has been carrying out nightly bombardment of Beirut’s once densely populated southern suburbs, a stronghold of Hezbollah. Overnight, a military spokesman issued three alerts for residents there to evacuate.

Israeli airstrikes on southern Lebanon continue
A view of the completely destroyed residential buildings after the Israeli army carried out airstrikes on the Dahiyeh area south of the Lebanese capital Beirut.

Houssam Shbaro/Anadolu via Getty Images


Nearly a week of Israeli ground operations in southern Lebanon, near Israel’s northern border, and two weeks of airstrikes in that region and in southern Beirut — both Hezbollah strongholds — had killed more than 2,000 people, the health ministry said. More than 1 million people have been driven from their homes, including tens of thousands under Israel evacuation orders in almost 100 towns and villages near the border.

Hezbollah started launching those attacks in support of its ideological ally Hamas, which is also backed by Iran, the day after Hamas sparked the ongoing war in Gaza with its Oct. 7, 2023 terrorist attack on Israel. The IDF says Hezbollah militants have fired over 10,000 rockets across the border since Oct. 8, 2023. The vast majority of them have been intercepted by Israel’s advanced missile defense systems.

Israel conducts more ground raids

The Israeli military said on Saturday its special forces were carrying out ground raids against Hezbollah infrastructure in southern Lebanon, destroying missiles, launchpads, watchtowers and weapons storage facilities. The military said troops also dismantled tunnel shafts that Hezbollah used to approach the Israeli border.

Some 1.2 million people have been driven from their homes since Israel escalated its strikes in late September aiming to cripple Hezbollah and push it away from the countries’ shared border. On Tuesday, Israel launched what it calls a limited ground operation into southern Lebanon.

Nine Israeli troops have been killed in close fighting in the area in the past few days, which is saturated with arms and explosives, the military said.

Americans attempt to leave Lebanon

The U.S. government has warned Americans not to travel to Lebanon since mid-September and urged any citizens in the country to leave via commercial travel routes. As of Friday night, the U.S. State Department has assisted approximately 500 U.S. citizens, permanent residents and their families to leave Lebanon on flights organized by the agency.

Other nations are also working to evacuate their residents from Lebanon. Germany has evacuated 460 citizens on German military flights, while a Dutch military transport plane carried more than 100 citizens out of Lebanon. There were also citizens of Belgium, Finland and Ireland who were repatriated on that flight.

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A military aircraft, the Multi Role Tanker Transport Aircraft (MRTT), departs from Eindhoven Air Force Base for Beirut to evacuate Dutch people who want to leave Lebanon.

ROB ENGELAAR/ANP/AFP via Getty Images


“It’s great that these people are safely back in the Netherlands. These have been tense times for them,” Christiaan Rebergen, secretary-general of the foreign ministry, said after they landed Friday.

Fighting ongoing in Gaza

Palestinian medical officials say Israeli strikes in northern and central Gaza early Saturday have killed at least nine people, including two children.

One strike hit a group of people in the northern town of Beit Hanoun, killing at least five people, including two children, according to the Health Ministry’s Ambulance and Emergency service.

Another strike hit a house in the northern part of Nuseirat refugee camp, killing at least four people, the Awda hospital said. The strike also left a number of wounded people, it said.

The Israeli military did not have any immediate comment on the strikes but has long accused Hamas of operating from within civilian areas.

Earlier in the day, the Israeli military had warned residents in parts of central Gaza to evacuate, saying its forces would soon operate there in response to Palestinian militants.

The warnings cover areas along a strategic corridor in central Gaza, which was at the heart of obstacles to a ceasefire deal earlier this summer. The military warned Palestinians in areas of Nuseirat and Bureij refugee camps, located along the Netzarim corridor, to evacuate to an along Gaza’s shore called Muwasi, which the military has designated a humanitarian zone. It’s unclear how many Palestinians are currently living in the areas affected by the order, parts of which were evacuated previously.

Almost 42,000 Palestinians have been killed in Gaza during the almost year-long war, according to the Palestinian Health Ministry, which does not differentiate between civilian and militant deaths.



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1-month-old twins who died with mother believed to be the youngest-known Hurricane Helene victims

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Month-old twin boys are believed to be the youngest known victims of Hurricane Helene. The boys died alongside their mother last week when a large tree fell through the roof of their home in Thomson, Georgia.

Obie Williams, grandfather of the twins, said he could hear babies crying and branches battering the windows when he spoke with his daughter, Kobe Williams, 27, on the phone last week as the storm tore through Georgia.

The single mother had been sitting in bed holding sons Khyzier and Khazmir and chatting on the phone with various family members while the storm raged outside.

Hurricane Helene-Georgia Deaths
This undated photo combo shows from left, Kobe Williams, and her twin sons Khazmir Williams and Khyzier Williams who were killed in their home in Thomson, Ga., by a falling tree during Hurricane Helene on Monday, Sept. 30, 2024. (Obie Lee Williams via AP)

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Kobe’s mother, Mary Jones, was staying with her daughter, helping her take care of the babies. She was on the other side of the trailer home when she heard a loud crash as a tree fell through the roof of her daughter’s bedroom.

“Kobe, Kobe, answer me, please,” Jones cried out in desperation, but she received no response.

Kobe and the twins were found dead.

“I’d seen pictures when they were born and pictures every day since, but I hadn’t made it out there yet to meet them,” Obie Williams told The Associated Press days after the storm ravaged eastern Georgia. “Now I’ll never get to meet my grandsons. It’s devastating.”

The babies, born Aug. 20, are the youngest known victims of a storm that had claimed more than 200 lives across Florida, Georgia, Tennessee, Virginia and the Carolinas. Among the other young victims are a 7-year-old girl and a 4-year-old boy from about 50 miles (80 kilometers) south in Washington County, Georgia.

“She was so excited to be a mother of those beautiful twin boys,” said Chiquita Jones-Hampton, Kobe’ Jones’ niece. “She was doing such a good job and was so proud to be their mom.”

Jones-Hampton, who considered Kobe a sister, said the family is in shock and heartbroken.

In Obie Williams’ home city of Augusta, 30 miles east of his daughter’s home in Thomson, power lines stretched along the sidewalks, tree branches blocked the roads and utility poles lay cracked and broken. The debris left him trapped in his neighborhood near the South Carolina border for a little over a day after the storm barreled through.

He said one of his sons dodged fallen trees and downed power lines to check on Kobe, and he could barely bear to tell his father what he found.

Many of his 14 other children are still without power in their homes across Georgia. Some have sought refuge in Atlanta, and others have traveled to Augusta to see their father and mourn together, he said.

He described his daughter as a lovable, social and strong woman. She always had a smile and loved to make people laugh, he said.

And she loved to dance, Jones-Hampton said.

“That was my baby,” Williams said. “And everybody loved her.”



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Telecom providers operate emergency communications after Hurricane Helene

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Telecom providers operate emergency communications after Hurricane Helene – CBS News


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When critical infrastructure like utility lines and cell phone towers go down, emergency response teams from telecom providers like AT&T and Verizon step in with an arsenal of equipment ensuring first responders can communicate in a disaster zone. Here’s how that’s helping in the aftermath of Hurricane Helene.

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