Posts Tagged ‘debt consolidation’

Debt Consolidation Is Not The Way To Go

In Uncategorized on July 14, 2011 at 2:52 pm

Debt consolidation companies advertise that they can negotiate with your creditors for lower payments and interest rates. They claim they can help you repay your debt quickly and improve your credit score immediately. If this sounds too good to be true, that’s because it is. Problems with debt consolidation include:
1. It is an unregulated industry under investigation by the federal and state authorities
2. These companies are not forced to deliver what they promise
3. People using these services can pay thousands of dollars in fees before any money goes to creditors.

Debt consolidation scams abound. I see many people who are being sued even though current on their debt plan payments. Take my advice. Chapter 13 is a much better alternative to debt consolidation.


How To Avoid A Deadly Trap

In Uncategorized on May 3, 2011 at 9:20 am

Credit cards are so useful and convenient. At least until you suffer a loss of income. Or unexpected medical expense. Or divorce. Or any other problem that impacts your ability to make monthly payments. Then credit cards become a trap. Think you can talk to the credit card company about lowering payments? Don’t count on it. My clients tell me that they get nowhere when they ask for a break. Miss three payments and watch your interest rate climb to 30%. Good luck trying to catch up payments after that.

You could get lucky and have a way to pay off the card. You could borrow against your home, but that is getting hard to do. You may have a retirement account you could tap into. If you can get together a lump sum payment, your creditor may settle for 50 cents on the dollar.

Other alternatives include debt consolidation companies and bankruptcy. Be careful with debt consolidation. I hear many horror stories from clients about them. It’s an unregulated industry. Many companies are being sued for false promises and fraud.

Chapter 13 bankruptcy lets you adjust payments on your debts based on an amount you can afford. You get the payment amount approved by a court trustee. You don’t need your creditors to agree.

If you are in default on your payments, your credit score has already taken a hit. Bankruptcy can stop the downward slide and help you to rebuild it. It’s a way to avoid the deadly credit card trap.