Debt Consolidation Vs. Bankruptcy

You may have seen advertisements for debt consolidation services on television. Many of these commercials promise to reduce your credit card debt to "pennies on the dollar." Unfortunately, after paying thousands of dollars in fees to the debt consolidation company, many consumers find that they are in a deeper financial hole than when they started.

At Charles J. Schneider, P.C., our attorneys have been helping individuals and business owners in Michigan discharge debt through bankruptcy since 1977. We provide a free initial consultation to discuss debt consolidation. Our law office is conveniently located in Livonia, Michigan, and we help individuals and business owners throughout the Detroit metropolitan area solve debt problems.

What Is Debt Consolidation?

Debt consolidation is a form of debt settlement. The service promises to consolidate your credit card debt into one monthly payment, which you will have to make to the debt consolidation company. The firm promises to negotiate with the credit card companies so you only have to pay a percentage of what you owe.

What the debt consolidation firm may not tell you is:

  • It will not negotiate with your credit card companies until it has collected its fees upfront. In the meantime, interest and penalties will mount up and you could be subject to collection efforts.
  • Credit card companies are not required to negotiate with the debt consolidation firm. Many refuse to do so or demand a far higher percentage of payment than you were promised.
  • The credit card company will report any canceled debt above $600 to the Internal Revenue Service. The IRS views canceled debt as income and taxes it.

How Does Bankruptcy Compare With Debt Consolidation?

Chapter 7 bankruptcy allows you to discharge 100 percent of credit card debt without negotiating with your credit card companies. Debt discharged through bankruptcy is not taxable. Your creditors are barred from calling you or attempting to collect debts that you owe.

Debt Consolidation Attorney Serving Westland And Metro Detroit

To discuss debt consolidation with a certified Livonia bankruptcy lawyer, call 734-237-1523 or fill out the contact form on this website. We offer evening and weekend appointments.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.