Debt Consolidation vs. Bankruptcy. Usually No Contest

We have all seen the commercials... eradicate or settle your debt for pennies on the dollar! Sounds like a great idea, right?  WRONG! Do not consider these programs for a second until you talk to an experienced bankruptcy attorney.  There is not a single piece of advice that I feel more strongly about it.

These companies, in my opinion, are shady at best and usually are down right deceptive. Many are under investigation.  A study conducted by the National Consumer Debt Center found that only 1.4% of the people that entered into "debt consolidation" programs completed the program.  That means 98.6% of the people ended of wasting their money and many still ended up getting sued, garnished and filing for bankruptcy anyway.

I have countless clients who have tried debt consolidation before learning the hard way it almost never works. In the meantime, they spent thousands of dollars and a lot of time to accomplish nothing.

How Debt Consolidation Really Works

How can this be? First, you have to understand how these companies work.  They have you stop paying your creditors altogether and instead instruct you to pay them a monthly fee which they are supposed to put into a trust account (minus their hefty monthly fee).  They allow this account to accumulate into a lump sum when they will offer to settle your accounts one at a time.  If they settle anything, it usually is the small accounts when it is the large accounts that are more dangerous.  During this time, all of your other accounts are not getting paid and proceed to collections, including lawsuits and garnishments.  And by the way, settling your debt for less than the full amount is quite damaging to your credit anyway.   After awhile, people painfully realize that little is getting done and wake up one day with a summons for court.

When Consolidation is Warranted

And here's the real kicker--if your circumstances warrant it--and sometimes they do--a bankruptcy attorney can do a better job at consolidation and they will almost always do it for less money.  Although I can and have done debt consolidation, I rarely recommend it.  And remember, because I can do both, I don't have an agenda and I am not a commissioned sales person paid to snooker people into an unwise and almost never successful program

So please, if you have been tempted by debt consolidation commercials...stop and call an attorney first.  He or she will give a truly honest assessment of your situation.  Heeding this one bit of advice can save you thousands of dollars and countless headaches.

Mr. Taggart is a 1997 graduate of The Ohio State University and is one of the only bankruptcy attorneys in Colorado with a Masters in Business Administration with a focus in Finance.  He earned his MBA from The Ohio State University in 1997 and is a cum laude with B.A. in economics from Kenyon College.  Mr. Taggart focuses on bankruptcy law and has helped hundreds of people in Chapter 7 and 13s across the state.
For a free consultation call 303-753-9701 or email him at coloradobk@hotmail.com.