What is a debt consolidation program?
There are many companies who promise to consolidate a person’s debts and negotiate settlements with creditors through a debt consolidation program.
Often, the agreement with the debt consolidation company involves an individual making one monthly payment to the company. That money is used to settle certain debts the individual owes.
Do your creditors have to negotiate with a debt consolidation company?
No. Creditors are not required to negotiate with a debt consolidation company. In some instances, creditors may be willing to settle a debt for less than the amount owed, but the settlement offer generally requires a lump sum payment within a short time frame from the time of the offer. When this happens and there is no deal made, the debt consolidation program will not protect you from collection efforts.
Are creditors able to still take action against you while you are in a debt consolidation program?
Yes. Even if a person is current on payments to the debt consolidation company, the person’s creditors can still take action to collect upon the debts owed. These collection efforts can include filing a warrant in debt, garnishing the person’s wages and/or bank account, obtaining a judgment lien on the person’s home, and repossessing property.
Often, people are advised by the debt consolidation company to stop paying on their debts and to make monthly payments to the debt consolidation company instead. This is done with the hopes that the debt consolidation organization will be able to make a deal with the creditors.
However, frequently, there is no deal made, people are several months behind on their debt payments when they become aware that no deal was made, and the creditors move forward with actions to collect on the debt.
Should someone who is considering a debt consolidation program also consider bankruptcy as an option?
Yes. We frequently help people resolve debts after a debt consolidation program has failed. Commonly, we meet with people who believed that their debts were being resolved through debt consolidation only to find out that this was not the case when they receive a summons to appear in court related to an outstanding debt.
While we are able to help those people through bankruptcy at that time, they often wish they had contacted us sooner to become informed about their bankruptcy options.
At Financial Freedom Legal, we offer free bankruptcy consultations that can be completed via telephone, Zoom, or in-person. We also offer flexible scheduling and we are happy to meet with you on evenings and weekends.
Generally, an appointment takes approximately 1 ½ hours to complete. At this appointment, you are able to explore your options with an experienced debt relief attorney. There is no obligation to file. If you are considering debt consolidation, we strongly recommend also taking the time to learn about your options under bankruptcy.
