Debt relief and debt solution programs come in all shapes and sizes. You might hear advertisements on the radio about a credit card debt settlement company or receive tempting balance transfer offers from your credit card company asking you to transfer what you owe to a different company to their card.
From consolidation programs to settlement services, the debt solution industry is a big business that makes a lot of money. Those profits and the money used to fund those advertisements all come from the people who already owe money. That is one reason why debt solutions often do more harm than good for those struggling financially.
Debt solutions often force someone to take on more debt
A consolidation loan is one big debt to replace multiple other, smaller accounts. Even if the monthly payment for the one account will be lower than the combined payments for the separate account, the amount of money that you have to repay is still the same. If you don’t close the accounts when you transfer their balance or consolidate them, you could end up using those accounts again and having far more debt than you did at the beginning of the process.
A debt settlement company will potentially offer you a loan so that you have the lump-sum amount necessary to pay off your lines of credit when they negotiate a settlement offer. Many of these companies charge interest and flat fees in addition to expecting you to make monthly payments to them.
Bankruptcy is an actual solution
Unlike most debt services that merely move what you owe from one company to another, bankruptcy actually solves your debt problem. A successful bankruptcy filing will discharge your credit cards and other unsecured debts. You will no longer have any obligation to repay those creditors. Additionally, if you file a Chapter 13 bankruptcy, you may have the leverage you need to renegotiate some of your other debts, like your mortgage.
Before you fall even further into debt trying to find a quick solution for your financial hardship, you may want to explore whether your circumstances warrant a bankruptcy filing. Learning more about personal bankruptcy could empower you to take control of your debt and balance your budget in the future.