If you are struggling financially, weary of the incessant calls and letters from creditors, you have likely seen advertisements on television or the Internet offering debt consolidation or debt settlement. These are two distinctly different programs, each with its own risks. Here’s an overview of the two concepts:
With debt consolidation, you work with a finance company or lender of some sort, combining all or many of your debts into a single payment. Ideally, you will pay off high interest credit cards and other loans with a lower interest consolidation loan. Most lenders will require that you secure the consolidation loan with equity from your home, or some other collateral, or that you get someone with strong credit to co-sign for you. If done properly, a consolidation loan can dramatically lower your monthly interest expenses.
In the debt settlement model, instead of combining debts and paying them in full, you (or typically a “credit counselor” or debt settlement company)attempt to negotiate a reduced payoff of a debt. Debt settlement is a very risky enterprise, particularly if the company you are working with is not well-known or operating in your best interests. Debt settlement companies take payments from you while they are negotiating with your creditors, but don’t make any payments until they have negotiated a deal. If you are unable to make the monthly payments to a debt settlement company, you will often find that the debt settlement company will keep all the money that you have paid them as “fees”, without having actually settled any of your debts. Furthermore, in New Jersey it is against the law for anyone other than an attorney to charge you for assisting you with “debt settlement” and as a result most debt settlement operations in New Jersey operate in violation of state law.
Contact John Hargrave and Associates
We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).