Millions of Americans struggle to manage their debt every day. Debt can come as a result of many different factors including opening a credit card and taking out a loan from a private lender. While most understand the responsibilities of using credit, some may have difficulty paying back the full amount owed. Over time, the debt can inflate to an amount the debtor cannot realistically afford to pay off.
After realizing that repaying the debt is not viable, many begin to search for ways to get around it. The first options considered are usually debt relief and debt consolidation. Most indebted Americans are attracted to such terms as “relief” and “consolidation” as they are simple solutions to eliminating debt. Unfortunately, most consumers are largely unaware of their ineffectiveness and risks.
Why Debt Consolidation is Ineffective
Debt consolidation is suggested to individuals with high consumer debt and involves combining various debts into one monthly payment. This is a process that can take over a year to complete, as various creditors attempt to negotiate on a mutually beneficial repayment plan.
Debt consolidation may seem like a viable debt relief option but it is an unregulated practice that often leaves debtors worse off than before. Consolidation companies persuade individuals who fear bankruptcy into believing they can repay their debts at a drastically reduced cost without any repercussions.
When consumers enter into a consolidation agreement, the consolidator collects payment for his services, often by taking funds directly from a debtor’s bank account. Once the consolidator has the full settlement amount that was agreed upon in the initial stage of consolidation, he attempts to negotiate with the collection agencies. By this point, the debt is already in collections, further harming the person in debt. The hope is that the third party collector will lack original debt information and be disallowed from pursuing the debt.
Debt buyers have caught onto the trend and now purchase debts with all of the necessary debtor information. When the third party debt collector provides proof of debt, the consolidator simply informs the client that he was unable to achieve settlement; leaving his pockets full and the client is left in even deeper debt with no other option but to pursue bankruptcy.
Do not allow debt consolidators to dig you further in debt. E. Orum Young Law Offices has over 35 years of experience and has filed the most bankruptcies in Northeast Louisiana. We house experienced bankruptcy attorneys who can discuss your current financial state and determine whether Chapter 7 or Chapter 13 bankruptcy is most suitable for your particular case. Call (318) 450-3192 today for a free consultation.