Denver Debt Settlement Attorney Can Help You Determine If Bankruptcy Is a Cheaper, Better Option
When your debt is piling up and collection agencies are calling you around the clock demanding payment, you may feel desperate for debt relief and wonder about your options.
One solution that you may hear about is called “consumer credit counseling.” It involves working with a counselor to assess your financial situation and learn about how you may get out of debt. If you meet the qualifications, you may then enter into what’s known as a Debt Management Plan (DMP), a way to pay off your debts at a reduced rate over a period of 36-60 months.
Upon first impression, this may sound perfect. And it can be a good fit for some people. It also may sound preferable to declaring bankruptcy, an idea that can conjure images of failure and shame, of financial ruin.
But the reality is that for many people filing for bankruptcy can actually be much cheaper and faster that partaking in credit counseling. Plus, your credit can then recover faster.
Bankruptcy does not mean your financial future is doomed. It may actually be the thing that helps you get back on your feet quicker and better.
First, let’s learn more about what consumer credit counseling is.
What Is Consumer Credit Counseling?
Consumer credit counseling agencies provide financial education and help toward getting out of debt. They can provide guidance on how to budget and save your money better, the debt relief options available to you, and how to improve your financial future.
They can also help you settle your debt through a Debt Management Plan. Essentially, this plan combines your debts into one monthly payment that is lower than what it’d be without the plan. This single payment can also be easier than trying to juggle numerous payments and creditors each month. The consumer credit counseling agency, in turn, works with your creditors to lower your interest rates and waive certain fees or penalties. The agency also is the one to pay your creditors rather than you.
If you keep up with the monthly payments, Debt Management Plans typically take 36-60 months to pay off and then you’re out of debt.
The Cons of Consumer Credit Counseling
First, not everyone can qualify for a Debt Management Plan. To quality, your unsecured debt (e.g., credit card, personal loan, medical debt, etc.) must typically be at least $5,000, and it must add up to 15%-49% of your annual income. For example, if your annual income is $50,000, your debt must be approximately $7,500-$24,500. If it’s more or it’s less, you won’t qualify.
You also are expected to be able to pay the monthly payments toward the Debt Management Plan. If you can’t do that, then you won’t be allowed to do the Debt Management Plan.
For people who don’t meet these requirements, filing for bankruptcy may be the smarter solution to get debt relief. Speak with an experienced debt settlement lawyer at Wink & Wink to find out the right fit for you.
There are also other cons to consumer credit counseling even if you do qualify for the Debt Management Plan. It’s important to consider these before choosing that as your debt relief option.
- It’s not free. There is a startup fee and monthly fee associated with doing a Debt Management Plan. This may make it harder to make your monthly payments.
- You won’t be able to use your enrolled credit cards while doing the Debt Management Plan. For any credit cards that are enrolled in the Debt Management Plan – as in, your monthly payment is going toward paying off those credit card debts – you won’t be able to use those credit cards during that time. They will be frozen or closed. If you need access to credit to make any payments – gas for your car, groceries, clothes, anything – you won’t be able to use those credit cards.
- Your principal won’t be lowered. Consumer credit counseling agencies can help lower your interest payments and other fees, but they can’t lower your principal – the amount due before any interest or additional fees. For example, if you charged $1,000 to your credit card and didn’t pay off the debt, the principal you still owe is $1,000, while any money owed above that may be interest/fees. Consumer credit counseling won’t help with that principal.
- Your credit can suffer while you are in the payment plan. Alternatively, your credit can recover within 2-3 years of filing bankruptcy.
- You can get sued while in credit counseling. Credit counseling also can’t stop creditors from suing you to get paid for the debt you owe. That’s another way a bankruptcy attorney is simply different, because they can help settle any lawsuits that may arise, while a credit counseling agency can’t.
Is Filing for Bankruptcy A Better Solution?
Everyone’s situation is different. That’s why it’s essential you speak with an experienced, respected bankruptcy law firm, such as Denver-based Wink & Wink.
Consumer credit counseling agencies do not provide services related to bankruptcy, so they often won’t recommend that as a choice, even if it is the smartest choice.
Skilled bankruptcy lawyers like Wink & Wink can help you settle your debt for a lower amount than a consumer credit counseling agency. Wink & Wink’s fees are typically lower, and they can negotiate cheaper lump-sum settlements on your behalf. This may in the end cost you less than what you’d pay in a 36-60 month payment plan with a consumer credit counseling company.
Learn Your Best Debt Settlement Option
There are several options when you’re dealing with overwhelming debt. Some sound nice on the surface but bring with them other problems or unwanted consequences. That’s why it’s crucial you speak with a debt settlement law firm with years of experience helping clients get the debt relief they so desperately need. Call Wink & Wink today at 303-410-1720, or get started with our online questionnaire to see which debt relief option is right for you.