Bankruptcy Versus Debt Consolidation Services
Like you, I constantly see ads for companies that claim they can negotiate down your balances with your creditors, get your interest rate lowered, and consolidate your bills into one low monthly payment. These ads run on TV, radio and the internet all times of the day and night. Some of these companies are legitimate and do truly want to help you get out of debt while others are fly-by-night operations who take your money and run. Whether they are legitimate or not, they all have one thing in common—they cannot stop your creditors from coming after you for payment. How do I know? Because I represented creditors in the past and creditors have certain rules for those people trying to collect the debts on their behalf. If the offer from your credit counseling agency does not meet the requirements a collection agency is given by the creditor, the collection agency can accept the proposed payments but does not give up their right to sue you on the entire remaining balance of the debt.
One of the many advantages of filing bankruptcy is that, when your case is filed, you are afforded the protection of the Federal Laws regarding bankruptcy. The best and most well known provision is the “automatic stay”. When your case is filed, your creditors are not allowed to contact you or try to collect the debt—they are automatically stopped from these acts. I like to think of it as they have their arms tied behind their backs. This gives you a time to breathe, regroup, and get your ducks in a row while your attorney, the trustee and the Judge look at your financial situation and find a solution with your help.
