Many of our Las Vegas clients ask us if they should try consolidating their debt through a debt consolidation company instead of filing bankruptcy.
We advise against debt consolidation.
Here’s what debt consolidation allows you to do: You can combine all of your credit card debt, car loans and other consumer loans into one single lower-interest loan. The idea is that you’ll be able to take the extra money you are saving and use it to get out of debt faster by making extra principle payments.
Sounds tempting, but here are some of the pitfalls:
- The number of unscrupulous debt consolidation companies being investigated by the Attorney General is astonishing. Many of these companies have been charged with deceptive practices like charging high upfront fees or taking the first month of their clients’ payments for themselves. Worse, some companies simply took all of their clients’ payments for themselves, and paid the creditors nothing. Unless you do extensive research and are confident that you are dealing with a reputable and honest company, your money and credit score might be in serious jeopardy.
- Your creditors can still call you to harass you for not paying their bills while you are paying off your consolidated debt. In fact, they can even sue you. Not so with a bankruptcy filing, which automatically stops creditor harassment and lawsuits.
- You may be saving money with your lower monthly interest payments, but you have to be 100% certain that you won’t use that money to get into more debt. Many of our Las Vegas clients have told us about how debt consolidation made their problems worse, by allowing them to incur more debt than they started with.
- You’ll need to scrutinize the terms of your new consolidated loan. Even though the monthly payments and interest rate might be lower, the life of your new loan might be longer, meaning that you’ll end up paying more interest in the long run.
Too many of our clients have had bad experiences with debt consolidation companies for us to recommend them. If you live in Las Vegas and are experiencing financial difficulties, contact our Las Vegas offices at 702-880-5554. You’ll be able to schedule a free consultation with our knowledgeable and experienced bankruptcy lawyers, who will help you decide how to get your financial life back on track. If you are calling from within Nevada, you can also reach us at 702-880-5554.