Household debts often start small and build over time. You added a little to the balance on your credit cards every month while filling the gas tank and buying groceries. Now, you owe so much on your credit cards that you don’t pay the balance off every month. In fact, all you can reasonably budget for is the minimum monthly payments for each of your accounts.
You may have no money to set aside into savings or to reduce the principal balances on your accounts. The idea that there is a debt solution service easily available to you can be tempting. Companies advertise on television and the radio, boasting that they can lower your monthly payments and help you eliminate your debt.
However, many of those businesses make quite a bit of money off of those already struggling with debt and do little to help those people resolve financial issues.
Debt solutions typically cost money
Whether you want a consolidation loan to pay off all of your high-interest credit cards or you would like to negotiate settlements with your credit card companies so you don’t pay the balance in full, there is typically a loan involved.
You may pay an origination fee and interest that could be comparable to what you already pay on the cards. With debt consolidation loans, there is a risk that you may pay off certain cards and then quickly build a balance on them again. With debt settlement services, not only will you still have a balance to pay, but the credit card company can report that you settled the balance and did not pay it in full, which can drag down your credit score.
Bankruptcy is a solution to debt issues
Many debt services only offer a topical bandage to what is a serious financial wound. You need sutures that will stop the bleeding before you worry about anything else. Bankruptcy gives you an automatic stay that prevents collection activity temporarily. If your filing is successful, you will also receive a discharge of the balances on your qualifying unsecured debts.
Looking at how filing for personal bankruptcy with the same issues that debt services purport to resolve could help you regain control over your financial circumstances.