There are a ton of debt management companies out there that will promise to consolidate your debt, or reduce your debt or give you ONE, LOW MONTHLY PAYMENT! All too often, they don’t work. Bankruptcy does, and there are really good reasons for that.
Remember two things. First, if it sounds too good to be true, it probably is; and second, there is a huge difference between a contract between you and a private company and Federal Law enforceable by the U.S. Court system with the assistance, if necessary, of the U.S. Marshals.
If you have tried a debt management plan or consolidation plan, one of those places that promises that it is every bit as good as a bankruptcy; only to find that the phone kept ringing, and the lawsuits kept coming? Well, first of all, actually read your contract. My guess is that if you sit down and actually read all the small print, you won’t like what you find. It also won’t promise results or relief. The problem with debt management or consolidation plans is that your creditors are not required to accept a deal that you cut with someone else. Think about it, if your creditors decline to go along with the plan, what is the debt management company going to do about it?
If creditors decide that the Bankruptcy Code doesn’t apply to them, the Bankruptcy Court’s orders are punishable by contempt of court. You won’t find that in the small print of a debt management contract.
Now, there are people who think that a Bankruptcy filing is too good to be true. It really isn’t for a variety of reasons. First of all, it is a public proceeding. Now, that doesn’t mean that your First Meeting of Creditors will be held in the middle of the local shopping mall. It does mean that your court file is a public record. Second, bankruptcy is an admission of failure. It hurts. It is hard to accept. It is hard to do. The for profit debt management companies know this. They play off of it. That is why people pay them and want to believe in them. Third, bankruptcy is about the worst thing you can do to your credit report (although, if you police your credit report post discharge, it won’t be nearly as bad as you expect). Finally, there is really good public policy in favor of our bankruptcy system.
One of many things that separates our economic system from most of the world is that we understand that not only does the freedom to succeed include the freedom to fail, the freedom to fail is necessary for the freedom to succeed. If you can’t afford to fail, you can’t afford to try. This makes more sense in a business context, but the consumer context is that someone with more debt than he can pay is not a contributing member of the economy. He is not taking care of himself and his kids. He isn’t saving for retirement and college. He isn’t out buying stuff, if he is too consumed with trying to pay for the past. Bankruptcy fixes this. That is serious economic policy that was recognized by our founding fathers, which is why the need for a Bankruptcy Code is one of the few areas of law specifically mentioned in the U.S. Constitution.
So, when a private company tells you that they are just as good as the United States Court system. Ask yourself, why you want to believe that.
Then, either contact Consumer Credit Counseling Services, which is one of the few legitimate debt consolidation companies that is non-profit and won’t misrepresent what they can and can’t do; or, admit that if you have too much debt to pay, you have too much to pay – consolidated or otherwise.