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  • Writer's pictureAttorney Kristy Hernandez

5 Reasons to Consider Bankruptcy Over Debt Consolidation

Hernandez Law & Realty does not offer debt consolidation services to clients because we believe it generally costs more and is less effective than debt settlement or bankruptcy. The following information will explain why:

First, a quick explanation of debt consolidation-

When you sign up to do debt consolidation you must immediately stop making payments on all of your unsecured debts (i.e. credit cards). The debt consolidation company will then have you make a monthly payment into a trust account. The idea behind debt consolidation is that you build a "pool of money" in that bank account. Once the pool gets big enough, the debt consolidation company starts to negotiate and pay off of your debts with those funds. What debt consolidation companies often don’t tell you is that each month you don’t pay your credit cards your credit score takes a hit. In addition, debt consolidation companies don’t have the power to stop your unpaid creditors from filing a collection lawsuit against you. AND while you are saving your "pool of money," debt consolidation companies are charging you percentage of your monthly payment each month.


1. Relieves Stress Immediately

Most clients who end up hiring my office after attempting a debt consolidation program have said that looking back, bankruptcy would have cost them a lot less, been completed faster, and would have gotten rid of all their debt promptly.

2. You’ll Know Exactly when You’ll be Debt Free

Under bankruptcy rules, the debt you owe will be considered wiped out as of the date your bankruptcy case is filed. This means that as your case moves through the court system, you are not taking monthly hits to your credit while you are waiting for the case to be approved. Your credit score will take the one-time drop due to the bankruptcy filing, not a lengthy downward spiral with no definite end in sight. As soon as your case is over, you can immediately begin the process of rebuilding your credit.

3. You have a Court Order Protecting You from Creditors

Unlike debt consolidation, the filing of a bankruptcy case will immediately stop collections lawsuits against you. It will also stop bank account levies, garnishments being taken from your wages, and foreclosures. The ability to stop these legal actions against you comes directly from a US Bankruptcy Court Order giving you automatic relief from your creditors. If a creditor continues to pursue collections against you, then you can petition the Bankruptcy Court to assist you in getting relief from the harassment.

4. One Fell Swoop

One bankruptcy case will take care of all of the debt you have (with a few exceptions). You do not need to approach every individual creditor to separately negotiate your debts.

5. You’ll Know the Cost Up Front

All attorneys are required to provide their clients with written fee quotes at the time you hire the attorney to take your case. This means that you will have a written agreement with regard to the amount of fees that you will have to pay. Knowing exactly how much your case will cost means that you can begin saving to pay your attorney’s fees immediately. You can also conduct a cost-benefit analysis to determine if the bankruptcy attorney fees are worth the amount of the debt you are getting rid of.

Buried in Debt?



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