Credit cards, medical bills and financial difficulties after divorce are three major ways in which consumers become overextended with personal debt. With the average family carrying $16,000 in credit card debt, many people in Arkansas and elsewhere may be attracted to the lure of debt consolidation or debt settlement companies. These companies promise to eliminate debts and get the debtors back on their feet financially.
Despite charging large fees and making substantial income on each account, these companies hardly ever succeed in helping to make the customer debt free. In fact, many consumers who sign up for such a program land in deeper difficulties than when they started. According to debt counselors, many debt consolidation companies use high pressure tactics to compel a consumer’s participation.
At the same time, they do not live up to the promise to cut the consumer’s bills substantially. When a debt company starts a person out on a plan of monthly payments, it may take the first three payments for fees. That may be followed up with a set percentage taken out of each additional monthly payment. This means that much of the money that one sends in to these companies ends up being a fee charged by the company.
Despite promises and assurances, the company cannot compel creditors to cooperate with a plan. The creditor may refuse in the beginning, it may hold out for a higher amount that is unaffordable or it may decide to drop out of the program at some time in the future without notice. The one certain way to make creditors wipe the debt off of their books is to file bankruptcy.
The reason that a personal bankruptcy works so easily is because it has the force of federal law behind it. The Bankruptcy Code was passed by Congress and is constitutionally protected. When it becomes critical for an individual or married couple residing in Arkansas or elsewhere to eliminate debts, the best course of action is to start with a thorough consultation and financial review with an experienced bankruptcy practitioner.
Source: wqad.com, “The truth and lies about those debt consolidation offers“, Denise Hnytka, Nov. 17, 2015