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Why Credit Card "Debt Consolidation"
Does Not Work!
The Law Offices of Neil E. Colmenares, P.C. are attorneys who concentrate in the complex area of Bankruptcy Law with an emphasis on telling the truth about Credit Counseling, Credit Repair and Credit Card Debt Consolidation. Our Bankruptcy Lawyers explain why Credit Counseling, Credit Repair and Credit Card Debt Consolidation does not work. We are Queens, Nassau & New York Credit Counseling, Credit Repair and Credit Card Debt Consolidation Lawyers.
The truth about Credit Card "Debt Consolidation" Companies.
Why Credit Card Debt Consolidation does not work is very simple. Most "Debt Consolidation" Companies who claim to be "non-profit" are wholly owned subsidiaries of the credit card industry! So when you hear a commercial for a debt consolidation company stating "we work with over 70,000 creditors to help you get your financial life back in order," you now know what their true relationship is with these creditors. The credit industry knows that some money via a "debt consolidation" payment plan is better than no money if the person files bankruptcy.
All a debt consolidation company does is call up your creditors and asks them if they are willing to accept less than the full amount currently due. The creditors will often say we will offer you a lower monthly payment and cut your total current balance by up to one half of the full amount due. So far so good. Now here comes the scam: They will increase the interest rate, have a payment schedule spanning many years with a prepayment penalty clause. The end result is that you pay much more money to the creditor over a number of years than if you had paid the amount in full.
Finally, if a creditor cancels some of your debt, you have to pay taxes on that amount! Cancellation of debt is a taxable event which requires you to pay taxes for that money. This does not apply if a person receives a discharge in Bankruptcy. This is why Credit Card Debt Consolidation does not work!
What about working directly with my Credit Card Company to lower my debt to them?
For the most part, Credit Card Companies have the best scam going. Before you try dealing directly with your Credit Card Company to consolidate your debt, know this about Credit Card Companies:
1) There is no cap on the amount of interest a Credit Card can charge you. That's right, your Credit Card Company can charge you 1000% interest a day if they want to.
2) Your current interest rate can change at any time! When you read the fine print of your contract (and try to find all the other text it makes reference to) you will discover a brutal, deceptive and sleazy truth. The terms of your credit card (including interest) can be changed with 30 days notice which normally comes in that fine print document which accompanies your monthly statement. So if you think you have a 4% interest rate on your credit card for as long as you have the card, think again!
3) If your make a late payment on one of your bills, then the other credit cards can raise your interest rates! This is known as the Universal Default Clause. So let's say someone stole one of your credit cards and you refuse to pay that bill, the other credit cards can raise your interest rates as a result of the late payment. This is not limited to credit card payments, this can apply to a late mortgage payment, store card payment, etc.
4) The Credit Card Industry has consistently refused to put plain language in your monthly bill stating how long it would take you to pay your bill if you make the minimum payment. They have refused to do this because they know that people would think twice about making a minimum monthly payment on a $100 debt if they know it will cost them $5,000.00 over several years.
5) If a creditor cancels some of your debt, you have to pay taxes on that amount! Cancellation of debt is a taxable event which requires you to pay taxes for that money. This does not apply if a person receives a discharge in Bankruptcy.
If Credit Card Debt Consolidation programs do not work, what is the alternative?
The Bankruptcy process can help repair credit and solve credit problems. A collection attorney will not be able to call you once a petition has been filed (limitations apply). Click here to learn more about Bankruptcy.
The Law Offices of Neil E. Colmenares, P.C. are attorneys who concentrate in the complex area of Bankruptcy Law. Our Bankruptcy Lawyers explain why Credit Counseling, Credit Repair and Credit Card Debt Consolidation does not work. We are Queens, Nassau & New York Credit Counseling, Credit Repair and Credit Card Debt Consolidation Attorneys. Payment plans are available!
For additional information about Bankruptcy, click here to read recent articles by Mr. Colmenares.
Want to read the Bankruptcy Code? If so, click here.
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Home Page, Contact Us, Recent Articles, Statement of Client's Rights and Responsibilities, Site Map, Immigration Matters, Espanol
Bankruptcy, Frozen Bank Accounts and Wage Garnishment, Chapter 7 Overview, Chapter 13 Overview, Mortgage Foreclosure, Discharging Taxes in Bankruptcy, Discharging Student Loans in Bankruptcy, Why Credit Card Debt Consolidation Does Not Work, Bankruptcy for Creditors
Business, Buying and Selling a Business In New York State, Commercial Lease Negotiation in New York State, Liquor License Procurement in New York State
*Prior results do not guarantee a similar outcome.
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