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Beware of Debt Consolidation Companies

In New Mexico you can easily become a victim of debt consolidation scams

Even if you try to be financially responsible, there are circumstances that can cause you to wonder if you will ever get your debt under control such as student loans, medical bills, losing your job, high credit card interest rates, and other financial disasters. If you are drowning in debt and you don’t see any way out of it, you can easily fall prey to debt consolidation schemes that seem too good to be true.

Most so-called credit counseling or debt consolidation companies cannot provide you with benefits that you get by negotiating with your creditors yourself or with an attorney. Even legitimate agencies won’t give you the same fresh start and legal protection that bankruptcy can.

Most credit counseling and debt consolidation agencies are part of the credit card industry

Though there are some legitimate debt consolidation companies, most of those are actually funded by the credit card industry. The National Foundation for Credit Counseling (NFCC) is the organization that certifies credit counselors and sets standards of conduct for its member agencies. A reputable, nonprofit consumer credit counseling service:

  • Is a nonprofit member of NFCC
  • Will not require you to pay any fees before counseling
  • Will provide you with a free credit analysis and free credit/budget counseling session
  • Will not offer to settle your debt for pennies on the dollar or offer quick-fix solutions
  • Will offer a debt consolidation management plan that usually covers three to five years and may include a debt settlement arrangement

Legitimate debt consolidation offers a plan that simplifies bill payments; it’s really a loan that gives you one monthly payment to one source. Debt consolidation is not the only solution to credit problems. Bankruptcy can be a safer and faster way to manage your debt.

Debt consolidation versus bankruptcy

Debt consolidation and filing for bankruptcy each have advantages and disadvantages. The following are things you should know before considering a debt consolidation program:

  • You need to be able to stick to a monthly budget
  • There are no federal regulations that govern debt consolidation programs
  • You may revert to your old spending habits and never catch up with your bills
  • Debt consolidation can sometimes cost more money than you currently pay

For most
people, debt consolidation just delays the inevitability of bankruptcy.
Although people often think they should avoid bankruptcy at all costs, it’s
often the best way to get a fresh financial start. With bankruptcy:

  • It can take only 3 months to get all debts forgiven
  • You don’t lose exempt items like retirement savings and you can often keep your house, household goods, car, and work-related assets
  • Your credit will begin to improve after you file for bankruptcy, but your but the bankruptcy does remain on your credit file for 7 to 10 years.
  • Under FHA guidelines, you can buy a house two years after your Chapter 7 bankruptcy discharge. Bankruptcy is not nearly the negative event on your credit that the credit industry wants you to believe.
  • In some cases, credit scores actually rise immediately after the bankruptcy is discharged (and go up from there) because the person has no more debt.

The bottom line is that if you can pay all your debts in full in two years and stay above water, then debt consolidation may be the best choice for you. If that is unrealistic, consider bankruptcy. In either case, it’s a good idea to discuss your options with a New Mexico bankruptcy attorney.

Contact New Mexico Financial and Family Law for a free initial consultation

New Mexico Financial and Family Law is an Albuquerque-based law firm that provides bankruptcy legal services and advice.Attorney Don Harris is a well-known and respected lawyer who works with clients throughout New Mexico. At your free initial consultation, he can help you determine if bankruptcy or debt consolidation is the best option for your specific situation. Contact New Mexico Financial and Family Law online or call (505) 503-1637 to arrange a  bankruptcy/debt consolidation consultation.

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New Mexico Financial Law, PC

320 Gold Ave, SW
Suite 1401
Albuquerque, NM 87102

(505) 503-1637

IMPORTANT: Free consultations only apply for Chapter 7 and Chapter 13 bankruptcy, or similar.