Debt consolidation advertisements have become ubiquitous with today’s emerging economy. You probably recognize how they begin with a consoling message about a “secret” that debt collection companies don’t want you to know, and that you don’t have to pay all your debts…and that you don’t need bankruptcy.
Debt consolidation is tempting because who wouldn’t want to get out of debt as quickly as possible. After all, rounding up random bills (that may or may not get paid every month) and combine them into one low monthly payment sounds like a great idea. The problem is that getting creditors to agree to take less is not so easy or certain, and a consolidation plan cannot exist without all creditors buying in. This may be especially difficult given that creditors know more people are back to work and are able to pay back their debt.
Meanwhile, you, as the consumer will be left holding the bag if things don’t work out. This is especially true if you haven’t made payments to creditors in lieu of getting a consolidation agreement. In fact, you may be left in worse financial shape than you were before contacting the debt consolidation agency.
Because of this, bankruptcy is not something that can be dismissed out of hand simply because of the specter of indecency that some lenders live by. Indeed, there are some temporary drawbacks, but there are long-term benefits that should be considered. An experienced bankruptcy attorney can explain them.
But if you believe that debt consolidation is best for you, doing your due diligence is critical. Searching the Better Business Bureau (BBB) or American Association of Debt Management Organizations (AADMO) are two good places to start.