How Does Consolidation Work?

Debt such as credit card debt, medical bills and sometimes even car loans can be consolidated into one payment by debt consolidation companies. However, the keyword here is “can.” If you go to a debt consolidation company, they will make an agreement with you to negotiate with your creditors into getting one monthly payment with a fixed interest rate. If successful, this is a good concept. However, many times and maybe most of the times debt consolidators are not able to get all creditors to agree. If just one creditor is left out, they can sue you for your liabilities.

Keeping Your Best Interests In Mind

In response to any lawsuit, a debt consolidation company is unlikely to help you. Instead, they will say they are “not lawyers” and will do nothing to protect your interests. A bankruptcy attorney can protect your interests in the event of a lawsuit. Filing for bankruptcy provides federal bankruptcy court protection and many other advantages.

At the law firm of Simon, Fitzgerald, Cooke, Reed and Welch, we want you to be well-informed regarding all your options and how each one applies to your particular circumstance. Our firm has been practicing bankruptcy law for well over 50 years.

Learn The Signs And Red Flags Of Debt Relief Scams

If you’re considering options for bankruptcy, your two main alternatives are debt settlements and debt consolidation.

In debt settlement, you or someone you hire negotiates with your creditors in the hopes of settling your debt for less than the full amount owed. Keep these considerations in mind:

  • Your creditors are under no obligation to negotiate or bargain with a debt relief company or agent.
  • Even with a deal, you can still be sued by creditors.
  • You may continue to accumulate interest and late fees while negotiations are taking place.

Warning signs of a scam:

  • The debt relief agency asks for payment upfront before it has done any work for you or secured any outcome. This is actually illegal.
  • The debt relief agency guarantees that your creditors will either forgive or greatly lower your debts. That’s not a guarantee anyone can make except for the creditor.

In debt consolidation, your debts are combined into one monthly payment with a fixed rate. You pay off the combined sum over a set period of time (10 years, for instance). Keep these considerations in mind:

  • If you’re paying less than the minimum payment set by a creditor, you may still be reported for making late payments.
  • Your debt often doesn’t shrink under debt consolidation. Rather, it gets spread out over time. It may actually grow due to interest and late fees (if not done correctly).

Warning signs of a scam:

  • The company or agent tells you to stop paying your bills and to stop communicating with your creditors.
  • The company or agent is reluctant to share information with you and doesn’t lay out exactly how the program works.
  • The company or agent comes across as pushy or aggressive.
  • The company or agent contacts you unsolicited (with a call, email or letter).

Bankruptcy Versus Debt Consolidation

If you are trying to decide between bankruptcy and debt consolidation, we can help answer your questions about both. Schedule a free initial consultation with one of our experienced Louisiana bankruptcy lawyers. There are no Chapter 13 upfront fees.

Call 888-341-8091 or contact us online for a free consultation at our nearest office:

Shreveport • Alexandria • Lafayette

Why Chapter 13 Bankruptcy?

Chapter 13 bankruptcy has many benefits compared to debt consolidation. Chapter 13 bankruptcy allows you to restructure unsecured debt into a three- to five-year payment plan. All creditors have to comply as it is court-ordered. If you are facing home foreclosure or motor vehicle repossession and creditor harassment, Chapter 13 automatic stays all of these.

Why Chapter 7 Bankruptcy?

Chapter 7 bankruptcy relief has one major advantage over debt consolidation: The ability to discharge a debt. Debt consolidation does not and almost never does reduce the debt that you owe. Chapter 7 also puts a stop to creditor harassment.

Focusing On Your Long-Term Financial Needs

We’re not here to talk you into bankruptcy, or talk you out of the alternatives, but to give you the facts on both. Our attorneys can represent your interests in debt consolidation or loan modification. We offer free initial consultations. Call us today at 888-341-8091 to discuss bankruptcy or debt consolidation.