Debt Consolidation

Many people who want to avoid filing bankruptcy seek a different option to achieve debt relief. Companies that agree to consolidate consumer debt can be very popular choices because they frequently deliver much lower payments than what debtors have been struggling with.

For consumers, it can indeed be extremely relieving to make a single payment at a lower interest rate once a month instead of juggling multiple bills at higher interest rates. The devil is in the details with these agreements though.

In many cases, debtors are locked into much longer periods of repayment that ultimately cost them even more money in hidden fees and total costs than the terms of the original loans.

Cincinnati Lawyer Reviews Debt Consolidation Loans

If you are completely overwhelmed with credit card bills, medical expenses, mortgage payments, or other assorted costs of living, you owe it to yourself to know all of your options. Steiden Law Offices helps scores of clients in Ohio and Northern Kentucky who are struggling to pay their bills and desperately need some kind of financial freedom.

Our Cincinnati bankruptcy attorneys understand why people are reluctant to consider filing Chapter 7 or Chapter 13, but we also know that any offer that sounds too good to be true usually is just that. Our firm can provide an honest and thorough evaluation of all your financial options as soon as you call to take advantage of a free, confidential consultation.


Northern Kentucky Debt Consolidation Information Center


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How Debt Consolidation Works

A consumer who has multiple loans will generally have a bank or lender provide a single loan that pays off all of the other smaller loans. In theory, this provides the debtor with much needed financial flexibility because he or she will now be making one smaller payment every month instead of paying several bills that had a higher total.

The specifics of any consolidation agreement vary depending on the consumer and the lender. If the debtor is trying to consolidate a secured loan, he or she may have to use the property subject to that loan as collateral.


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Disadvantages of Debt Consolidation

People who consolidate their debt frequently focus simply on the monthly payment. As understandable as this sentiment is, it is also what lenders and companies want debtors to concentrate on.

The truth is that despite the lower interest rates offered by many consolidation agreements, the amount of time that is required to pay back these loans is much longer. For example, a person who was making two payments of more than $500 each for two loans of $10,000 may consolidate the loans into an agreement that requires a single payment of $650.

While such an agreement would indeed save the person more than $350 a month, the terms of agreement may stretched out over three or more additional years. Such an agreement then results in the consumer actually being mired in debt even longer than he or she would have been, and paying even more money to resolve the debt in the end.


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Debt Consolidation vs. Bankruptcy

Many consumers who are in tough financial situations weigh the pros and cons of bankruptcy against the advantages and disadvantages of consolidating debt. The truth remains that bankruptcy often offers multiple forms of security not possible in consolidation.

Examples of these differences include:

  • Legal Protections — When a person files bankruptcy, an automatic stay goes into effect upon filing. This immediately ends all collections efforts, meaning no more phone calls from creditors or threats of lawsuits. Additionally, it also ends or prohibits any wage garnishment. These protections are not available under debt consolidation.
  • No Tax Liability — Certain types of debt that may be settled through consolidation can be reported to the IRS, and debtors may have to pay taxes on those amounts.
  • Shorter Term of Repayment — While consolidation will frequently stretch out over a period of six years or longer, a Chapter 7 bankruptcy case is closed within four to six months. If a debtor enters a Chapter 13 repayment plan, he or she will be finished in three to five years.
  • Total Debt Reduction — In Chapter 7 or Chapter 13 bankruptcy, a consumer agrees to pay only a fraction of what he or she owes. Consolidating debt does not reduce the total amount repaid, instead just spreading the same amount over a longer period of time.

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Resources on Debt Consolidation Companies

Federal Trade Commission Act — This act that established the Federal Trade Commission (FTC) is now more than a century old, but it is still used to prosecute debt consolidation schemes that violate federal laws. This PDF of the act provides a larger overview of definitions, unfair methods of competition, offenses, and penalties.

Debt Consolidation Loan Research — This website of the private, non-profit National Endowment for Financial Education (NEFE) contains information about the organization’s research into debt consolidation programs. You can find links to an executive summary, final report, and press release. The website also has additional information about the NEFE, what the organization does, who it helps, and other services it provides.


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Find a Bankruptcy Lawyer to Help You Get Out of Debt

Do you help paying your bills? Are you behind on car or mortgage payments? If you are looking into alternatives to bankruptcy, make sure that you truly understand whether consolidating your bills is really in your best interest.

With offices in Mainesville and Cincinnati in Ohio, and Florence and Covington Northern Kentucky, our bankruptcy attorneys can help you understand the best way to proceed with debt consolidation or filing for bankruptcy. Call to find out more about all of your options.

Whether you are considering filing your case in the U.S. Bankruptcy Court Southern District of Ohio Cincinnati Divisional Office or the United States Bankruptcy Court in the Eastern District of Kentucky, Covington Division, call us for more information.

The Cincinnati bankruptcy attorneys at Steiden Law Offices help clients in Ohio and Northern Kentucky achieve much-needed financial relief by filing Chapter 7 or Chapter 13 bankruptcy. Our firm can review your case and discuss all of your best legal options. Call to schedule a completely free initial consultation.

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