Debt Consolidation vs. Bankruptcy

Pooling all your debts into one payment at a lower rate sounds like a good solution. Don't be fooled. Most debt consolidation programs do not work. In fact, most debtors who go that route end up in worse financial shape.

Atlas Consumer Law is committed to foreclosure relief and debt solutions. For many of our clients, bankruptcy is the best solution or the only viable one. For other clients, alternatives such as loan workouts or debt settlement may do the job. But debt consolidation is almost never a wise move.

Contact us online or call our office at (312) 313-1613 for answers to your questions about bankruptcy and debt relief options.

Debt Consolidation vs. Bankruptcy: Which Is the Right Path to a Fresh Start?

Debt consolidation is usually a scam, or a fruitless exercise at best. Why is consolidating your loans and debts a bad thing?

  • Most outfits charge steep upfront fees and/or high monthly fees, offsetting any savings from lower interest rates.
  • Most debt consolidators do not negotiate any discount of the amount you owe.
  • Creditors do not have to honor the plan. You can still be subject to late fees, interest, negative credit reports, harassing phone calls and collection actions.
  • Many people have trouble making the huge monthly payment.
  • Consolidations often mix secured and unsecured debts.

The bottom of line is that most debt consolidation plans do not get you out of debt.

Tom and Katie* had medical, credit card and judgment debts totaling $80,000. They paid $2,500 to an agency that promised debt freedom without the downsides of bankruptcy. Despite making $1,000 monthly payments for five years, they are still dealing with $25,000 in unsecured debts, ruined credit scores and harassing phone calls.

  • While not a magical cure, bankruptcy offers numerous advantages over debt consolidation:
  • Bankruptcy actually eliminates or reduces the debt.
  • Debts covered by bankruptcy do not incur interest, penalties or delinquencies.
  • The phone calls and threats stop immediately.
  • Bankruptcy suspends foreclosure, repossession and wage garnishment.

In appropriate cases, our firm can negotiate debt settlements with creditors in lieu of bankruptcy.

Get the Facts and Make an Informed Decision

If you are considering debt consolidation, or if consolidation loans have not helped your financial crisis, talk to the Chicago bankruptcy lawyers of Atlas Consumer Law. We regularly help individuals with high incomes and substantial debts get back on track.

Contact Atlas Consumer Law online or call (312) 313-1613 to arrange a consultation.

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