Filing A Chapter 7 Bankruptcy Versus Debt Consolidation

The large majority of my clients have tried debt consolidation or debt settlement programs prior to coming in for a free consultation.  Many, if not most debt consolidation programs prey on people who have fallen behind on bills most often due to illness, unemployment (or just under employment), divorce or a death in the family.

I had a very close friend try one of these programs (without my knowledge) and she ultimately filed a Chapter 7  Bankruptcy to eliminate her credit card debt.  My friend paid in $20,000.00 over four (4) years only to realize that the debt consolidation company only paid out $13,000.00 on her debt and kept $7,000.00 as its fee.  She did the debt consolidation because she thought she was doing “the right thing” because after all she did incur the debt.

By doing the debt consolidation first she not only lost $7,000.00 but she delayed the opportunity to rebuild her credit.  After the four years of trying to pay her debt she had to file bankruptcy anyway.  Her credit score would have increased greatly over the four (4) years she was in the debt consolidation company if she had just filed for bankruptcy in the first place.  In addition, a Chapter 7 Bankruptcy will cost on average about $1,100.00 (for a basic case) to $2,500.00+(for a complex case). Remember fees are almost always quoted by attorneys on a case by case basis because every case is different.  By the way, my friend was in a program that set her up to fail because there was no way she was going to pay-off all her debt within the five (5) year term of the program.  The math just did not make sense.  She would have still owed money on the debt even after completing the program.

Before you make the same mistake talk to a local bankruptcy attorney.  The consultation is almost always free.  What do you have to lose?  Get your fresh start today!

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