Debt is a common issue in the United States. The average household may have credit card debt as well as a mortgage and a car loan, to say nothing of the student loans that the parents may carry as well. Given that the average American household does carry some degree of debt, it is no surprise that there are companies looking to turn a profit off of people struggling financially.
You may have seen ads on the television or heard them on the radio discussing debt relief companies that can consolidate your debts or help you negotiate a lower balance for a lump sum payoff amount. These services may sound excellent, but in reality, they are often only a topical bandage on a severe wound.
Debt relief services do very little to help you sort out the issues contributing to your financial crisis. Instead, they help you push out payments or reduce the number of creditors you pay. That is why for many people, bankruptcy is a safer and more permanent solution to overwhelming debt then debt solution services.
Companies aren’t going to help you out of debt for free
The first thing you need to realize is that the companies offering these debt relief services are trying to make money. Even if the business itself has a non-profit structure, the staff that works there and the advertisements they put out to attract clients cost a substantial amount of money.
The only source of that money is from the people who use their service, which means that you will be adding additional debt to your current load by using these services. A debt consolidation loan, in many cases, may not have any upfront fees or costs. However, you need to look at how much interest you will pay over the life of the loan. It’s also important to look at the charges they will assess if your payments are late or you exceed the maximum balance for your line of credit.
Companies that settle your debt to reduce how much you owe may charge a flat fee or also require that you finance the payoffs through their company.
If you often depend on credit cards to make ends meet, chances are good that you will soon find yourself struggling with both of the pressure of those credit card statements and the debt consolidation loan at the same time.
Bankruptcy actually offers you a fresh start
Unlike debt consolidation or negotiation, which often simply involves transferring the debts from one company to another, bankruptcy actually discharges your unsecured debt so that you don’t continue to pay on it anymore. Instead of heaping yet another debt on to your family, bankruptcy helps you get rid of outstanding dots and free up more of your income to cover the costs you incur as part of daily life.
Depending on your income and the assets you own, you may want to consider either Chapter 7 or Chapter 13 bankruptcy. Either form of bankruptcy can help you take control over outstanding debt and avoid the pitfalls involved with questionable debt solutions services.