Given the way the economy has been for the last year, bankruptcies are clearly on the rise. If you’re swamped in debt, you are absolutely not alone. So when you see those ads promising you debt consolidation, you would of course be tempted to work with those companies?
If you want to go bankrupt, sure. The FTC reports that most of these companies are actually offering a great deal on bankruptcy, which really can be filed alone. That’s right, the companies that apparently “save you from all those annoying collecting phone calls” are actually filing bankruptcy for you. Ironically, they charge you for legal fees (http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt015.shtm ).
As I have preached before, the best way to consolidate your debt is to take your finances into your own hands. As is the situation with most “quick-fix solutions”, the costs often outweigh the benefits. As is the case here, filing for bankruptcy will, in fact, stop the collection calls, but if not handled correctly, bankruptcy can ruin your credit.
So if you actually do need to apply for bankruptcy, make sure you do it on your own terms. Bankruptcy is certainly not the apocalypse of your finances, but if you can avoid it, it should be. Therefore, keep your finances in order, and take no shortcuts with them. Do not fall for these advertisements.
In recent years, the FTC has been suing most of these companies who claim they can lower your interest rates and reduce your debt (http://www.msnbc.msn.com/id/18155301/ns/business-consumer_news/ “A Widespread Problem”).
There are a few different ideas you can use instead of choosing these firms. According to the FTC, here are the 3 best things you can do:
Try to talk with your creditors first. It is in their best interest to keep your finances afloat, otherwise they will lose their investment. With this in mind, perhaps they will be able to lower your rates and cut you a deal.
Work with accredited credit counselors, who will help you talk to your creditors for you to work out a better payment plan.
Finally, it might be within your best interest to take out another loan. However, take this advice with a grain of salt. If you are racked up in debt, another loan might not be in your best interest. Keep your finances in check, and weight your options carefully (http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt015.shtm).