Examining Debt Consolidation Programs
You've probably heard the phrase "low monthly payment" on television or radio advertisements, and maybe you've wondered whether the debt consolidation and second mortgage plans described in these ads can help you manage your debts.
Unfortunately, many people fail to understand the details of these plans and how they differ from the federal government's bankruptcy protections. At Walton Legal Services in Indianapolis and Columbus, Indiana, we help people understand their debt management options. Contact us to talk to a lawyer before enrolling in a debt consolidation program.
No Protections for Debt Consolidation Clients
Debt consolidation companies typically operate by collecting a reduced monthly payment from their clients and attempting to negotiate with creditors so that the creditors will accept a reduced payout in a settlement agreement. Their programs may also include some amount of debt counseling, usually for a fee.
In some cases, because the debt consolidation companies are aware that many creditors will not negotiate until the debts are long overdue, they will simply sit on their clients' money rather than using it to pay creditors.
Debt consolidation gives you no protection from threatening phone calls, lawsuits and other oppressive debt collection practices.
Unlike most debt consolidation programs, both Chapter 7 bankruptcy and Chapter 13 bankruptcy will generally result in the cancellation of at least some of the debts you owe to your creditors. Like debt consolidation, Chapter 13 bankruptcy involves making an affordable monthly payment, but under a Chapter 13 payment plan, your eligible debts will be erased after three to five years.
While there may be some responsible debt consolidation companies out there, even the most well-run programs cannot offer the benefits of bankruptcy protection under federal law. Contact our attorneys to learn more about your legal rights so you can make an informed decision.
Consider Second Mortgage RisksAnother group of companies that make similar claims as debt consolidation companies are second mortgage companies. These people often advertise that by taking out a second mortgage, you can pay off all your existing debts and make a single, lower monthly payment on the mortgage. Unfortunately, what this usually amounts to is putting your home on the line for questionable benefits. A second mortgage generally does nothing to reduce your overall debt burden. Bankruptcy, on the other hand, offers real debt relief. |
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
