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Question – I signed up with a Debt Consolidation Service because I wanted to avoid a bad credit record from a bankruptcy. But when I tried to get a mortgage, I was turned down because I was told that my credit was bad, because my credit report showed that my debts were being paid through my Debt Consolidation Service. How come this ruined my Credit?
Answer – This is another misrepresentation made by Debt Consolidation Services. They will not tell you before you sign up and pay them fees, that their Consolidation of your debts will be reported on your credit report in a very negative way, and that it can impede your ability to obtain credit, such as credit cards, loans or a mortgage. Debt Consolidation Services will give you a misleading and exhaustive lecture on how Bankruptcy will ruin your life. They will tell you all kinds of false and misleading information, such as that by filing for bankruptcy you will be banished from obtaining any credit, that you will be discriminated against, that you will not be promoted on your job, and that you will suffer humiliation from a bankruptcy by publicly declaring yourself to be a failure. None of this is true. Debt Consolidation Services are closely aligned with credit card companies and they want you to believe this propaganda, because they want you to pay them their fees. Why would a Debt Consolidation Service recommend that you file for bankruptcy in a situation where a bankruptcy filing would result in all of your debts being wiped clean? Bankruptcy will have a negative impact on your credit report. However instead of having many numerous monthly negative references continually made on your credit report by your creditors, for many people the best way to repair your credit is to take one negative report of a bankruptcy, and then work to repair your credit from your new and often debt free financial situation, so that you can apply for a mortgage or loan in the future.
Question – I intend to sign up with a Debt Consolidation Service anyway. Is there anyway to protect myself from being cheated?
Answer – Probably not. But you should at least demand the following be written into your contract and signed by the Debt Consolidation Service:
1. The Debt Consolidation Service should state what percentage of people who sign up for their program actually successfully complete the program. I assume that it is about five percent. More of these people end up filing for bankruptcy anyway, after spending thousands of dollars on these services.
2. A clear statement as to what fees you will pay, the monthly plan payment amount, and the number of months that you will have to make these payments, and a guarantee that this will not change.
3. A guarantee that your creditors will accept these payments and that they will not transfer your account or change their mind and sue you anyway after you have made many payments, and that if they do, that you will get your payments back.
Unfortunately for you, no Debt Consolidation Service will ever give you these basic guarantees in writing. This is why having an attorney is so beneficial to you. The first responsibility of your attorney is to protect you from harm, by making sure that your filing for bankruptcy will have benefits to you that far outweigh the negative aspects of a bankruptcy filing. Attorneys are licensed and monitored by the State of New York, and they have fiduciary responsibilities to you as a client, to advocate for you and to advise you on your situation, in a confidential manner. Considering that a Bankruptcy attorney is often much cheaper than a Debt Consolidation Service, you should at least contact an attorney for a consultation, which is often given free of charge.
Question – Is bankruptcy legal? I mean is it fair for me to get rid of my dischargeable debt?
Answer – Bankruptcy is a legal proceeding based upon laws passed by Congress and known as the Bankruptcy Code. Congress passed these laws because they understood that people often through no fault of their own incur debt that they cannot repay. If you have a substantial amount of debt, then you should at least consult with a lawyer to determine whether filing for Bankruptcy would be beneficial to you. Why should you suffer through the oppression of debt and allow the stress to affect your relationship with your family. Actually many supporters of Bankruptcy are children’s rights advocates who understand that in any family situations, forcing the breadwinner to pay back debts would only make children suffer because their parents would be unable to properly support them. Do you think that your children will be happy to remember their childhood by saying “well I know that my mom couldn’t afford Christmas presents for us, but I’m so proud of her, because she never missed a payment to her Debt Consolidation Service”.
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