Bankruptcy v. Credit Counseling
By Carmen Dellutri, Attorney at Law on Sep 17, 2007 in Bankruptcy Myths, Benefits of Bankruptcy, Consumer Protection, Florida, Personal Finance
As a consumer bankruptcy attorney on the West-coast of Florida, I know that the decision to file bankruptcy is a very personal and emotional decision and should only be made when all of the debtor’s options, bankruptcy and non-bankruptcy, have been thoroughly explored. In my view, debt repayment plans do not work. I see people in my office all of the time that have been involved with the debt consolidation shop du jour. These programs are designed to fail. Here are my top five reasons why I usually do not recommend debt consolidation programs to clients. First, very rarely do the programs deal with all of the creditors. In other words, the debt consolidator cannot guarantee that they will be able to deal with each and every creditor, thereby leaving the debtor with multiple payments instead of having one monthly payment. Second, many of these companies are being subsidized by the credit card companies or the finance industry. In essence, they are just another form of a collection agency for the creditors.
Third, they are not considering what is right for the debtor in the long run. Debt consolidators don’t care if your goals include buying a home in the next couple of years. Fourth, the debt stays on your credit report for seven (7) years from the date of the last payment of the consolidation, thereby hindering your ability to rebuild credit right away. Fifth, each creditors will issue the debtor a 1099C at the end of the taxable year, thereby increasing the debtor’s tax liability.
I’m sure I can think of more if I sat here long enough. Maybe one of my fellow bloggers will think of a couple more reasons and add to this list.
If you liked that post, then try these...
When Do I Know Its Right To File For Bankruptcy? 5 Top Reasons. Part II of II. by Michael Doan
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