The Truth about Debt Consolidation and Debt Settlement
Time and time again, potential clients call me with an unbelievable pitch. A Debt consolidation or 'Debt Relief' company has promised to settle their debt for pennies on the dollar. Just make thousands of dollars in payments to this company, and all will be fixed. Meanwhile, your creditors are supposed to leave you alone. It sounds too good to be true, and once you read the fine print, you'll realize that it is. While I won't label these companies scam artists, they come close. Here's why.
- Debt Consolidation Companies can wind up taking thousands of dollars up front for themselves before they pay any of your creditors.
- The agreement you make is between you and the debt consolidation or debt settlement company, NOT with your creditors, so they can still collect against you and sue you.
- In most cases, you'll wind up paying 100% plus interest and fees to your creditors.
- Debt settlement can still ding your credit, so ask them up front, and read up on the impacts.
- Your payment is based on how much you owe, not how much you can afford.
Bottom line: Read the fine print before you sign up, and if you need help understanding it, contact us.
Chapter 13 Bankruptcy Can Be Better
Chapter 13 bankruptcy can often be a better alternative to debt management companies who engage is debt settlement and debt consolidation. Here's why.
- You are protected from ALL collections actions, including garnishment, harassing phone calls and lawsuits.
- The attorney fees are often subsidized by your creditors.
- You can pay as little as 0% (that's zero percent) to your unsecured creditors.
- Your payment in most cases is dependent on your income and expenses over the life of your payment plan. In other words, it is based on what you can afford, not how much you owe.
- You are protected from ALL collections actions, including garnishment, harassing phone calls and lawsuits.
- The attorney fees are often subsidized by your creditors.
- You can pay as little as 0% (that's zero percent) to your unsecured creditors.
- Your payment in most cases is dependent on your income and expenses over the life of your payment plan. In other words, it is based on what you can afford, not how much you owe.
There are exceptions to this, and it's wrong to paint all of these companies with the same broad brush. For example, if you're amazingly wealthy with thousands of dollars in disposable income, debt management may be right for you. But if you're struggling to get by, these companies can become a massive a waste of money and time. For more information on how Chapter 13 can be a better fit than debt consolidation, contact us now at 303.630.9641 or contact us below.
