Debt Reduction Companies May Be Helpful But Beware of the Terms

While debt reduction companies sound like a good idea, most of them are not.

There are a number of debt reduction companies in the marketplace that say they can negotiate you a lower interest rate, cut what you owe by at least 50 percent and not affect your credit rating. It does sound good. However, these agencies often do not deliver what they promise, and there is a difference between bankruptcy and debt reduction.

For those individuals who owe more than they can pay, finding help through a debt reduction company or declaring bankruptcy are two of the leading options available to them. However, it is wise to know the differences before you proceed. Bankruptcy is a legal option that lets debtors either eliminate all or most of their debts via filing a Chapter 7 or Chapter 13 bankruptcy. Typically Chapter 7 clears all debts. Chapter 13 is a renegotiated debt with a more affordable payment.

Each state has different bankruptcy laws, and so it is wise to speak with an Iowa bankruptcy lawyer to understand what your options are in Iowa. During that discussion, you will find out if bankruptcy will help you with your particular circumstances. While declaring bankruptcy does provide financial relief, there are consequences. The biggest one is the reduction of your credit score that remains on your record for up to ten years.

If you are considering debt reduction, also referred to as consolidation, with a company that says it can help you, you will discover they help by combining all your payments into one payment a month, usually lower than what you currently pay. This sounds good. However, most of these types of companies do not have a debtor’s best interests at heart. Their main goal seems to be scaring the debtor into using their services by telling them how bad their credit report will be, which is a given, even if you declare bankruptcy. This is not news.

Most of these companies are able to come up with a lower monthly total, because it is spread out over a much longer period of time. This means you will pay quite a lot more to retire your debt. While this option might suit you, and you may not mind paying back more over a longer period of time, it is wise to consider both bankruptcy and debt reduction before making any final decisions. If you are not certain which route to take, consider speaking with a qualified Iowa bankruptcy lawyer.

Kevin Ahrenholz is an Iowa bankruptcy lawyer and Iowa bankruptcy attorney. To contact him, visit https://www.iowachapter7.com or call 1.877.888.1766.