Debt Consolidation Scams

Debt consolidation seems like a cheaper alternative to bankruptcy, but as with any business there are the shady owners who are looking for nothing more than to make a quick buck. If you are in serious debt and considering using debt consolidation, you want to be on the lookout for the companies which are simply out there to steal your money. Although it makes a smaller black mark on your credit report, there are times when bankruptcy is a better alternative to debt consolidation. Consulting with a Chicago bankruptcy attorney may help you learn what is best for your situation.

What is Debt Consolidation?

In short, debt consolidation is where a single company loans you the money needed to pay off all your debts. Rather than owing several different companies, you are now only indebted to the debt consolidation company. This allows the company to set your interest rates and take in that interest as profit.

How do they scam me?

Legitimate debt consolidation companies will not scam you, however there is a seedy underbelly in the debt consolidation world.  Many times these companies will quote you extremely low interest rates – far lower than is practical in the real world. You may get to pay these interest rates for a short while, but soon they will quickly climb up to levels far beyond what they originally were.  Another method used by these shady companies is to quote low interest rates but simply rake in fees for every single interaction you have with the company. A Chicago bankruptcy lawyer may be able to help you determine if debt consolidation is the proper course of action for your debt. In some cases, bankruptcy may be the better decision.

How can I protect myself?

When choosing a debt consolidation company, take the time to do research into the history of the company. If you have any friends or coworkers who have used these companies before, talk with them and see if they have any recommendations. You can also use the Better Business Bureau, or BBB to review the company’s history. You can use the BBB to review any previous complaints that have been filed against the company. If your chosen company has a large number of complaints over a long period of time, you may want to rethink your decision.  Legitimate companies will work out a plan to help you get out of debt and answer any questions you may have. They want your business and will be glad ti work with you.