Debt relief services often try to advertise themselves as though they do something that benefits the public. They want to make themselves seem like they are heroes saving people from aggressive creditors, collection agents and unscrupulous credit card companies.
What the radio and television ad companies won’t tell you is that some people who use debt relief services find themselves in worse debt than they were before they got started. For many people with levels of debt that they cannot reasonably expect to pay off, Chapter 7 bankruptcy is the fastest and most effective means of regaining financial control.
Debt consolidation means taking out new loans
Debt consolidation is one of the more common debt services available. Companies make it sound attractive by promising lower monthly payments and lower interest rates. If you already can’t pay your credit card companies, consolidating it into one big bill might help for a bit, but you may soon wind up with credit card balances again. Such practices are particularly dangerous when you transfer a balance from one credit card to another, possibly incurring fees along with massive interest costs.
Debt settlement can have multiple negative consequences
Debt settlement involves working with a third-party to negotiate a settlement amount for the outstanding balance that you owe on various accounts. It seems like a great deal at first because you only have to make one big payment to get rid of your overwhelming debts.
What you may not realize is that you may need to take out a new loan as part of the settlement process. Additionally, those settled accounts can have a negative impact on your credit report, making it harder for you to get good credit in the future because you settled an account instead of paying it in full.
Bankruptcy gets rid of your debt instead of just moving it around
Both debt settlement and consolidation require that you take out new loans and could potentially result in negative marks on your credit score. As if that weren’t bad enough, you will still have to pay all of that debt off at some point.
Bankruptcy is a solution that can discharge the balance on your unsecured debt. Instead of needing to repay a different creditor, you can get rid of those debts and rebalance your budget with a successful Chapter 7 filing.