10 Myths of Debt
Consolidation
It is no mystery
that ever since we became connected in the vast world wide web of
things that we have been bombarded with companies that will help us,
from our weight to our finances. But beware, there are pitfalls to
the debt consolidation plans.
1. All your
creditors will play nice. Myth number one, most agencies, and
trust me the vary widely in skill and expertise, are just third party
payment systems, where you pay them, one fixed payment, and they pay
your creditors from that payment, for the most part, you are not
getting any deal, or negotiation from these companies with your
creditors at all, they just pay your bill, after taking a fee for
themselves.
2. Agencies
that are part of the National Foundation for Credit Counseling or
Financial Counseling Association of America insure that your are
getting the best quality and service. Myth number two, they are
just guideline entities and have no real teeth. The “accreditation”
just looks good on paper.
3. Plans
vary widely and are flexible. Myth number three, they are not.
All plans are basically the same and no agency has any special trick
or arrangement with a creditor that another agency does not, don't
fall into that trap that you can get some special treatment with one
that you cannot get with another.
4. Counseling
before Consolidation will give you many options. Myth number
four, wrong, the only option they will give you is to get into their
plan, period. Why, because they are running a business and they only
make money if you sign up, they make no money if they push you in
some other direction, such as bankruptcy, or if you are completely
broke, into doing nothing at all, the latter two make them zero, so
why would they recommend them. They want your money, so they will say
what they need to get you into their program.
5. Consolidation
is right for everyone. Myth number five. Wrong, don't let them
tell you that it is the only way to go, there are many reasons why
debt consolidation is wrong, if your debt is secured, they cannot
help, or tax related, or child support related. Don't fall into that
trap.
6. It is easy and
simple to do. Myth number 6. If it were easy and simple to do,
you would do it yourself. They will tell you that you don't have to
worry about your creditors, just make the payment to them and they
will handle it all, wrong, try telling your credit card company to
call your credit counselor they are handling your affairs, they will
tell you to go jump in a lake. The only thing that a credit
consolidation company wants is your money, not your phone calls.
7. Once
you sign up, you are done, nothing else to worry about. Myth
number 7, wrong, again. You will still be getting statement from your
creditors, and the balances they say may not match what the debt
consolidation company may say, you have to be 100% plugged into the
program and monitor it at every turn, you cannot go on auto pilot
like they say. You will have a rude awakening if you do. And, if you
think you cannot be sued, or garnished, think again, if you do not
pay your creditor, or the company you hire does not, you will
be
sued!
8. You can keep
your cards and still charge. Myth number 8, you will be asked to
voluntarily close out your accounts, which, if you still need them to
survive, can have a negative effect on your credit, closing out the
accounts will not help your credit score one bit.
9. Debt
Consolidation is good for your credit. Myth number 9, wrong yet
again, all these accounts will be notated with a third party payee,
which if you are a lender, sends up huge red flags, indicating that
you are in some financial peril. These programs, can have the
absolute opposite effect on your credit.
10. Consolidation
programs are cheap compared to bankruptcy. Myth
number ten, 100% wrong, wrong, wrong. The average chapter 13
bankruptcy fee is about $3,000, the average chapter 7 bankruptcy fee
is about $1,000, the average credit consolidation is near $7,000 over
the life of the program, with many of that taken out up front before
any money ever goes to your
creditors.
Don't
be fooled into a debt management or consolidation program, if you
truly want to pay off your debt you are way better in a chapter 13
bankruptcy, where your accounts freeze, your interest freezes or goes
down to zero, you have the help and expertise of your skilled
attorney, you have protection from your creditors under federal law,
and if there is a dispute you have a Judge to hear them. Call Me!
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