The Disadvantages of Kentucky Debt Consolidation

What Is Debt Consolidation?

Debt consolidation typically falls into one of two categories:

1. Using a debt consolidation company or

2. A debt consolidation loan

Debt Consolidation Companies

Debt consolidation companies attempt to negotiate with your unsecured creditors for

a lower interest rate,

balance reduction, and/or a longer term in order to lower your monthly

payment to that creditor

You make one monthly payment to the debt consolidation company and

the company uses that money to pay your creditors

Unfortunately, there are several disadvantages of using a debt

consolidation company

Debt Consolidation Company Disadvantages

The debt consolidation company charges monthly fees for their

service

This could cost more in the long term than you actually save by using this

service

Not all creditors are required to negotiate with the debt consolidation

company

You could have several creditors that you must continue to pay each month in addition to your payment to the debt

consolidation company

Creditors can continue to take legal actions to collect the debt including

filing a collection lawsuit

Creditors can continue to report negative remarks on your credit report, especially if you are paying less than the full balance owed on the account

If a creditor “forgives” a portion of the debt, you must report the “forgiven” amount on your tax return as income

This could result in an increase in your income tax debt

You have no control over when the debt consolidation company pays the

creditors each month

If the payments are late, the creditor will continue to report late

payments on your credit report

Creditors can continue to contact you in order to collect the debt. (i.e.

debt consolidation companies cannot stop creditor harassment.)

Debt Consolidation Loans

A debt consolidation loan is simply a loan that you incur to pay off other

debts

There are several disadvantages to consider

Debt Consolidation Loan Disadvantages

You are trading unsecured debt for secured debt if you use your home, vehicle, or other assets to secure

the debt consolidation loan

If you cannot make the payments on the loan, you face losing the asset through repossession or

foreclosure

If you are unable to pay the debt payments each month to individual creditors, you have a high risk of becoming delinquent on the debt

consolidation loan

The interest rate on the debt consolidation loan could be higher

than on some of the individual accounts

You could also pay more in the long term if the debt consolidation loan will take longer to pay off than the

individual accounts

Bankruptcy as an Affordable Debt Solution

In many cases, a bankruptcy will solve your debt problems without

the disadvantages of debt consolidation

Before you contact a debt consolidation company or apply for

a debt consolidation loan,

contact our office for a free bankruptcy consultation to get the facts about how a bankruptcy filing can help you solve your financial

problems permanently

Contact an Experienced Kentucky Bankruptcy Attorney

Contact us at our Radcliff Office in Hardin County at (270) 351-6032, our Louisville Office in Jefferson

County at (502) 964-1968) or toll-free at 1-800-754-HELP to schedule a free consultation with one of our

attorneys

You may also contact our office through our convenient online

contact form

We’ve Helped Thousands of KY Families, we can help you!

The bankruptcy lawyers of Musselwhite Meinhart & Staples,

PSC have over 50 years of combined legal experience

We understand the stress and anxiety caused by financial

problems and we want to help you

You do not need to struggle to pay your debts as you try to provide for

the needs of your family

We represent clients throughout central Kentucky

Learn More About Disadvantages of Debt Consolidation In Kentucky

Click to visit:

www.mmslawonline.com

Content provided by: Best Legal Practices