Las Vegas Debt Consolidation Lawyer
Your bills are piling up. You know it’s time to do something. But, should you file bankruptcy or try debt consolidation? Knowing the difference between the two will help you make a more informed decision.
Here is how Bankruptcy compares to Debt Consolidation:
Which Offer The Best Results, Bankruptcy or Debt Consolidation?
It’s important to remember that Bankruptcy can allow you to discharge most, if not all, of your unsecured debt. In many cases, Bankruptcy will eliminate most of your debt without any payment. So long as you commit all of your disposable income to the Bankruptcy you will received your Bankruptcy discharge. In many cases, there is no disposable income, so there is no income to commit to a Bankruptcy and you receive your discharge without payment under a Chapter 7 Bankruptcy.
Bankruptcy discharges Unsecured debt, including:
- Credit cards;
- Personal loans;
- Payday loans;
- Most lawsuits;
- Medical bills;
- Utility bills
Filing bankruptcy will also require you to complete a credit counseling and financial management course that will give you a head start on rebuilding your credit and show you how not to end up in debt again.
Debt Consolidation, on the other hand, mostly fail. In fact, statistics show that over half of all people who sign up for debt consolidation plans drop out before completing the payment plan. Why? Because many people get sued by their creditors while in a debt consolidation plan.
First, debt consolidation plans many times do not accept all debt into the plan, such as payday loans and internet loans. Therefore, even though you are in a debt consolidation plan, you may still have unresolved debt. How can that work when you have to continue to pay to the debts with the highest interest rates while you are supposed to be committing your income to the debt consolidation plan.
Next, Debt consolidation plans operate by estimating how much they think they can settle each your debts that they accept into the plan. Then you stop paying your creditors and start paying the debt consolidation company. Most of the early payments goes to pay the debt consolidation company’s fees. As you continue to make the debt consolidation payments, once enough money is built up that the debt consolidation company believes it can settle one of your debts, it begins to negotiate with such creditor. Many of the initial debts do in fact get settled. But what about all of the rest of your creditors. By this time it has been many months, probably 12-18 months since any of your creditors have been paid. This about when you will get sued by the unpaid creditors and drop out of the plan. Remember, the debt consolidation company has already been paid, so you are free to leave the plan at that time. Not good.
Which Provides The Most Protection?
Bankruptcy is law of the United States. Under Title 11 of the United States Code, Bankruptcy also offers legal protection so that you don’t have to worry about being sued or harassed by your creditors while completing the bankruptcy process. This means Bankruptcy is mandatory for your creditors, they must participate in the process.
In contrast, your creditors are under no obligation to negotiate, nor participate in any debt consolidation program at all. Your creditors remain free to enforce your loan contract and promise to pay.
Which Will Allow Me to Receive a New Loan Faster?
Filing bankruptcy can allow you to eliminate all of your unsecured debt. A bankruptcy will remain on your credit report for seven to ten years. However, eliminating the debt that you are unable to pay, will greatly improve your financial position and thus, credit score. In fact, after filing for Bankruptcy, your credit score will probably improve even though the bankruptcy still appears on your credit report. As your credit score improves so does your likelihood of being extended future credit.
Debt consolidation means that you will consolidate all of your bills and pay one monthly payment amount towards the total debt owed. The payment period can last anywhere from three to five years, depending on the amount of debt you have. Most financial institutions will not extend you a new line of credit until your payment period has ended and you have established some new positive credit. Of course, since, under a debt consolidation plan, you are not paying your creditors are agreed, your credit score continues to suffer.
Advantages of Filing Bankruptcy vs. Debt Consolidation
- Bankruptcy can allow you to eliminate your debt, and in most cases without payment.
- In Bankruptcy you still keep your home and car.
- In Bankruptcy you are more likely to resolve your debt.
- Most credit card companies will give you a card after bankruptcy. If you pay off the balance each month, you will avoid those high interest rates and rebuild your credit in the process.
- Debt consolidation does not include payday loans or internet loans.
- Creditors do not have to participate in debt consolidation.
- In debt consolidation, your credit score does not improve your debt has been resolved.
Contact an Experienced Las Vegas Bankruptcy & Debt Consolidation Lawyer
If you are struggling with a large amount of debt and need help, schedule a consultation with an experienced Las Vegas, Nevada bankruptcy lawyer. Call the Law Office of Rodney K. Okano at (702) 566-3600, or contact us by using our contact form.