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Bankruptcy May Be Better Than Consolidation

 Posted on April 16, 2013 in San Antonio Bankruptcy Attorney

Debt consolidation has long been hailed as an alternative to bankruptcy. Consolidating debt can make large debts manageable, enabling the debtor to wrap his head around the money that he owes and conceive of a plan to pay it off. Yet lately many debt consolidation companies have come under fire for shady practices, meaning that in the end of the day, it might be better to file bankruptcy. According to US News and World Report, “debt consolidation loans are like a politician during an election year—they make a lot of promises, but don’t always deliver.” Some of these promises include (but are not limited to): convenience, lower interest rates, and lower monthly payments. Yet most debt consolidation companies fail to mention that many plans leave debtors with “high fees, greater debt and potentially more interest payments,” according to US News and World ReportBankruptcy May Be Better Than Consolidation IMAGE

There are warning signs to watch out for if you’re considering debt consolidation, according to US News and World Report. The first is to not use consolidation as a “cure-all.” It can be likened to fad dieting—it may work for a while, but at the end of the day, only dedication and persistence (likened to financial chastity and responsibility) can relieve one of debt. “Estimates suggest that at least 70 percent of those who consolidate their debt end up with as much or more debt a few years later.”

Another warning sign to avoid is any consolidation company that charges a hefty fee for their service. If you’re adamant that consolidation is for you, try looking into options like no-fee, no-interest credit cards that offer 12 or 18-month no-pay plans. Another thing to be wary of is the fact that you may end up paying more interest over time, subsequently increasing your debt rather than squelching it. “While you may lower your monthly payments… the lower monthly payment may be the result of extending your payments out over more years,” according to US News and World Report. This just means you’ll end up paying more in the long run.

If you or someone you know is considering debt consolidation, bankruptcy might be a better option. Don’t go through it alone. Contact a dedicated Texas bankruptcy attorney today.

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