Debt Consolidation vs. Bankruptcy?

Debt Consolidation vs. Bankruptcy?

Debt Consolidation vs. Bankruptcy?

Debt consolidation refers to the process of refinancing several debts into one single payment. Some people consider debt consolidation as a chance for a lower overall interest rate and a longer time to pay off the debt.

But does this process actually work? OVERALL, NO – HERE IS WHY!
Consolidating debts in New York could require forming a relationship with a credit counselor. Handling debt consolidation with a debt consolidation program, is usually only effective with high-interest credit card debts. This requires you to reshape your lifestyle with a debt payment plan while the credit counselor negotiates with your creditors and offers you a presumably lower interest rate on outstanding debts. There is no guarantee that this rate would be lower. The rate is set by the creditor, and depends on a variety of issues. Past payment behavior and credit score factor into that rate and, because you’re having debt issues, those variables could be detrimental. While there would be only one monthly payment under this plan, it is a façade for your true debt situation. Additionally, credit counselors are usually only effective when dealing with lower levels of debt. Your one payment could be massive and difficult to sustain on a monthly basis. A consolidation loan is another method for debt consolidation. The lender reimburses your creditors and charges you interest on a new, larger loan. Like the debt consolidation program, there is no guarantee what the interest rate would be, and with a new loan of that magnitude, credit scores would be heavily weighed. If your spending habits are an issue and your personal financial climate is strained, a consolidation loan would not work adequately. A loan would add further stress, despite it being consolidated into one sum. Also, the assumption is that your living style will change and that your financial standing is based upon the payments of that particular loan. In reality, this is an unrealistic expectation.
If you do manage a lower interest rate through debt consolidation, it can prove to be a poor long-term investment in terms of actual dollars. The lender could disguise the loan with a lower rate and smaller payments. For example, if debts are consolidated and the company tells you your payment and interest rate are lower, they could be omitting a major factor: the period of time to repay the loan. If it takes you a longer time, it isn’t a cheaper option—it is a prolonging of debt. With a lengthy loan payment plan, spending habits could worsen and more dollars could be spent repaying it. It presents too great a risk.

As opposed to debt consolidation which almost always fails, in a Chapter 7 Bankruptcy, if successful, you can wipe out certain debt and not have to ever repay it in the future. 

While debt consolidation could appear to be beneficial, it often takes advantage of individuals with debt issues. Several factors, such as a scam by your lender, could worsen your situation. It’s important to consider the actual process of debt consolidation and how it ultimately doesn’t work.

Contact our office today to discuss your options with a bankruptcy attorney in Queens at (718) 340-3385.

  • Top Lawyers (2017-2018-2019)
  • Google
  • NYS Academy of Trial Lawyers
  • BBB
  • Avvo - Clients' Choice
  • Yelp
  • Super Lawyers

Reviews from real clients

  • I had the pleasure of working with Seni Popat. He is a Top Professional!

    “I had the pleasure of working with Seni Popat. He is a Top Professional! I recommend him highly hands down. He's very experienced when it comes to bankruptcy and explains everything in detail when it ...”

    - I Gie – via Google
  • Law Office of Seni Popat is the place to get help.

    “I had debt over 100 thousand in credit cards and loans filing Chapter 7 and thank God for helping me this is a excellent dictator and understanding professional attorney telling everyone who needs a ...”

    - Willie Kornegay - via Google
  • He is very knowledgeable, professional, helpful and was readily available to guide me and advise me through the filing process.

    “I lost my job due to health issues and facing serious financial problems. Credit cards and hospital bills kept piling up and I couldn't sleep. MR.Seni Popat listened to me and advised me on the best ...”

    - James Potter - via Google
  • Seni was absolutely fantastic.

    “Seni was absolutely fantastic. I was super anxious and I had googled for someone that was well known. He came up so I gave him a try. Honestly I do not even write reviews. We met. He responded to me ...”

    - Nicole H. - via Google
  • Mr. Seni Popat is THE BEST bankruptcy lawyer there is.

    “Mr. Seni Popat is THE BEST bankruptcy lawyer there is. He cares for his clients. He goes above and beyond. I was at first very stressed out. After meeting with him it all went away. His office staff ...”

    - Yasmeen Smith - via Google

Contact our office

Free Consultations Available. Call us at 718-340-3385
  • Please enter your first name.
  • Please enter your last name.
  • Please enter your phone number.
    This isn't a valid phone number.
  • Please enter your email address.
    This isn't a valid email address.
  • Please make a selection.
  • Please enter a message.