Bankruptcy or Debt Counseling?
Certainty and the “Wildcard” Creditor:
Debt Consolidation: There is no court order protecting you, and creditors cannot be stopped from collecting on the debt if they choose. Possibly creditors will accept a payment plan, but maybe they won’t. There is absolutely no way to know this until the prospective debt consolidation company COLLECTS THEIR FEE FIRST and “negotiates” LATER. An aggressive, “wildcard”, creditor can, and usually does, ruin the entire debt consolidation scheme. Many of my past clients have described entering a debt consolidation company and felt like a “leaf in the wind”. Some creditors may even demand payment in addition to what the debt consolidation company has “negotiated”, even years down the line. There is absolutely no certainty in the debt consolidation process.
Bankruptcy: A bankruptcy filing triggers Federal protection from your creditors, called the Automatic Stay provision of the Bankruptcy Code. This Court injunction is very powerful and prevents almost ALL debt collection activity. The Automatic Stay has the power to stop minimum payments, lawsuits, foreclosures, repossessions, garnishments, license suspensions, and general creditor harassment. Bankruptcy relief provides certainty with your future. You will know exactly where you stand in relation to your creditors when the case is filed. In most cases, all creditors are addressed the same way and it is normally not a “negotiation” process with each individual creditor. This normally eliminates the possibility of a “wildcard,” aggressive creditor who absolutely refuses negotiation and demands payment in full.
Zealous Representation and Regulations:
Debt Consolidation: Believe it or not, some debt consolidation companies are sponsored, or even created by the credit card companies themselves. They “sell” their service as “better than bankruptcy” and like. In reality, this is one last attempt at gouging your budget and household income. Some debt consolidation companies do not have your best interests in mind when “negotiating” with your creditors. Frequently, payment plans are created to minimize the loss for the credit card companies on a defaulted account, before the inevitable bankruptcy filing. Though government regulation has somewhat improved, debt consolidation still feels like the “wild west” to many of my past clients.
Bankruptcy: You can rest assured that Foster Law Offices is a licensed, experienced law firm that always puts your best interests first. We have no obligation to your creditors and we will do what is best financially for you and your family. There are strict ethical rules in Pennsylvania that govern attorneys and Courts in general. One of the most basic attorney rules is “zealous representation”. This ensures that Foster Law Offices consistently works to put you and your family in the best financial situation possible. You will never need to worry about your best interests being compromised.
Exorbitant Interest Rates:
Debt Consolidation: Normally the reason someone would even consider debt consolidation would be based on the credit card industries outrageous interest rates. Rarely are these rates completely eliminated in debt consolidation. Some creditors may agree to a marginal decrease in a rate, some may not. Either way you will never see a true end to the “interest circus”.
Bankruptcy: Bankruptcy almost always eliminates the interest component of an unsecured debt, whether it is Chapter 7 or Chapter 13. In a Chapter 7, not only is the interest component eliminated, but usually the entire unsecured debt is eliminated completely with no repayment. In a Chapter 13, normally a percentage of the principal balance is re-paid over three to five years, however, ongoing contractual interest is eliminated. This creates certain elimination or repayment of the principal balance of the unsecured creditor under either Chapter.
Debt Consolidation Fees:
Debt Consolidation: Many debt consolidation fees are hidden in a lengthy fee agreement or structure. The fee for debt consolidation can be several hundred or several thousand dollars as there is little or no regulation on their fee structure. Debt consolidation companies almost always take their fee first, even before the negotiations start. They usually “hustle” a potential customer into a payment scheme with no real certain results. More often than not, the first several months of payments go directly to the debt consolidation company and your creditors receive very little out of the gate. This payment scheme obviously does not go over well with the creditors and can get you sued in short order.
Bankruptcy: Attorney fees in general and the fees associated with Foster Law Offices are closely monitored by the United States Trustee, the Courts and the Pennsylvania Bar. In other words, you can be assured that fees will be reasonable and there will be certainty. In general, Bankruptcy attorneys cannot “hide fees” or create misleading fee agreements like some debt consolidation companies. If you retain a competent, licensed attorney, your hard earned money won’t be wasted on an illogical payment plan to your creditors. Unfortunately, MANY of my past clients have sought out my bankruptcy services AFTER they have lost several thousand dollars through an unsuccessful debt consolidation experience. Recouping any of those lost funds is normally very difficult and time consuming to say the least.