What Is Debt Consolidation?
If you are having a difficult time with an overwhelming debt circumstance and are seeking an alternative to bankruptcy, debt consolidation may be the solution for you! It is a means of debt relief in which your debt burdens get replaced with one monthly and more affordable monthly payment. It is a solution that helps you get out of debt in an easier fashion. How it works is by combining several unsecured debts that each has their own high-interest rates. After they are consolidated, they do not have their own separate interest rates. With the legal assistance of a debt consolidation lawyer in Charlotte, we can help you cut back on interest rates through debt consolidation. Speak with the Law Office of Jack G. Lezman, PLLC today.
What Are the Pros and Cons of Debt Consolidation?
Debt consolidation is a viable option for those who can find a debt consolidator willing to purchase a large portion or the entirety of their debt. In some cases, this leads to a catch-22 where those who really need the services of a debt consolidator are not able to find one willing to take on their debt. Consider the question from their perspective. They are purchasing a vast sum of debt in order to guarantee you a lower interest rate. If you can’t repay that debt then their options for recovery are limited and you have the option of discharging much of that debt in bankruptcy. So the only folks who tend to qualify for debt consolidation services are those who sterling credit.
However — this also depends on what kind of debt you have. Those that have a lot of secured debt like mortgages, car loans, or other kinds of debt that is secured by the property itself can generally find a debt consolidator who is willing to purchase their debt. If, however, you default on the loan, the debt consolidator will be able to take your property as collateral.
Secured vs. Unsecured Loans
Secured loans are much easier to find consolidators willing to purchase because some real property like a car or a home backs the loan. The loan itself is easier for you to manage because it’s one simple payment with a fixed interest rate. When this interest rate is lower than the combined interest rates on the other loans then you’ve found yourself a good deal. Many folks opt to go through a debt consolidator for this very reason.
Unsecured loans are much more difficult to find a consolidator for. If your credit is good, you may be able to find a consolidator who is willing to purchase both your secured and unsecured debt and offer you a fixed interest rate at a lower cost. But since the loan is only backed by your fiduciary responsibility to repay it, or — in other words — your promise that you will repay it, it must more difficult to find a debt consolidator when you really need a debt consolidator. Certainly, those who are contemplating bankruptcy will have a great deal of difficulty finding a debt consolidator willing to purchase any amount of unsecured debt.
Pros and Cons of Consolidating Secured Debts
If you consolidate your secured debts there is a strong likelihood that you will, in fact, save money. So that’s the upside right there. The downside is that you’re pledging your assets as collateral so if they end up in default, you’ll lose the assets.
Debt Consolidation vs. Bankruptcy
There are almost no situations in which debt consolidation is a legitimate alternative to bankruptcy. While you can save money by consolidating debts, debt consolidation offers you not much more than a monthly consolidated debt payment at a lower interest rate than the one you currently have. Those who are delinquent in payments to various creditors will have a hard time convincing a debt collector that they are making a sound investment and if the property is secured by collateral then you run the same risk that you would if you stopped making payments in the first place.
In other words, consolidating your debt is not going to help you recover from a hopeless situation. In some cases, people end up with payment plans that cost them more money or take longer to pay off than if they had simply kept paying on their debts.
On the one hand, there are no consequences to debt consolidation. In the best case scenario, your interest rate is lower and your debts are easier to pay off. In the worst case scenario, it takes longer to pay off your debts and maybe costs a little more. Filing for bankruptcy will have a negative impact on your credit. It does, however, have some upsides.
Debt Consolidation vs. Chapter 13
If most of your debt is tied up in secured loans, debt consolidation may be a viable option. On the other hand, if you can’t make the payments without a debt consolidator, there isn’t much of a chance of making the payments with one. On top of that, debt consolidators don’t tend to pick up unsecured debt unless it’s backed by some collateral. So, the extent to which debt consolidation will help you depends on whether or not you can make the single monthly payment required.
Bankruptcy is somewhat more versatile. You have Chapter 7, which can discharge your unsecured debt. You also have Chapter 13, which can reorganize your debt around a repayment plan. While neither looks great on your credit report, there are ways of rebuilding your credit after filing for bankruptcy. It is a matter of time, patience, and making smart decisions with your money moving forward.
If you are considering filing for bankruptcy, the chances are not good that a debt consolidator will provide you with a repayment plan that will miraculously make all your debt troubles go away. Chapter 13 does provide folks with that kind of relief. It just comes at a cost.
It’s also possible that debt consolidation can work with you and with no consequences to your credit score, it could be the right solution. That is something you can discuss with your debt consolidation lawyer.
A Debt Consolidation Lawyer in Charlotte Can Help You Find a Solution That Best Suits Your Needs
The first step you should take is to seek a free case evaluation from our firm. At the Law Office of Jack G. Lezman, PLLC, we can assess the health of your finances. After a careful examination, our experienced debt consolidation lawyers can help you know the best option. We can get your questions answered and guide you through the process. Typically, debt consolidation is for those who hope to secure a fixed interest rate and a convenient way to repay their loans. If the debtor wants to avoid bankruptcy, then the debt consolidator will essentially buy the loan at a discount in some circumstances.
There are many advantages to debt consolidation, but it is not meant for each individual. At the Law Office of Jack G. Lezman, PLLC, our goal is to see you prosper, no matter what direction you take. We offer unique solutions to each individual’s personal situation. As Charlotte bankruptcy attorneys, we listen to your situation to assess the best plan. Our firm can help you know how to best take care of your financial obligations. It is important to obtain the information you need to accomplish your case.