When people come and see me, they often ask about debt consolidation. Specifically, they want to know if using a debt settlement company will get them the results they are looking for without having to file for bankruptcy. I also meet with many people who have tried debt consolidation through a debt settlement company and have found that they did not get the results they were looking for.
Common Issues with Debt Consolidation Companies in Arvada and Parker
Here is a list of some common issues with debt consolidation and debt settlement companies:
No guarantee all creditors will be willing to settle.
Debt settlement companies often get a few creditors to settle, but others will continue to pursue collection avenues. These debt settlement companies have no recourse for stopping debt collectors from trying to obtains payments on the outstanding debts. Often, people think the harassing phone calls and letters will stop when they get a debt settlement company involved, but this is not the case. They will also not be able to stop a creditor from seeking a law suit for payment.
Certain creditors refuse to work with debt consolidation companies.
Debt settlement companies usually present as the perfect go between for you and your creditors. However, there are certain creditors that will not work with debt consolidation companies. These debt settlement companies know this, but will not share this information for fear that they will lose your business.
Look out for hidden fees.
Debt consolidation companies will typically take a percent of any money they get the creditor to forgive. Some companies will add on other fees, taking more than what was expected and costing more money than you expected.
How Bankruptcy Addresses the Debt Settlement Company Issues
Because bankruptcy is a legal proceeding, creditors are not given as much power as they are through a debt settlement. As far as a creditors willingness to settle and refusal to cooperate, with a Chapter 7 or Chapter 13 bankruptcy the creditors do not have a choice. When the judge enters an order, all must abide. Also, an automatic stay is entered preventing creditors from attempting to collect on a debt while the bankruptcy is pending. Bankruptcy will cut down on the time it takes to take care of your debt.