Bankruptcy vs. Debt Consolidation

Many of our clients have tried debt consolidation before talking to us about bankruptcy. In most cases the debt consolidation was not effective for the clients, the debt consolidator simply charged incredible fees, but never delivered on the debt relief. The clients then talk to me and find out that they should have filed bankruptcy before even attempting the debt consolidation. In many cases consulting with a bankruptcy attorney would have saved the client thousands of dollars and would have solved the debt problem. The main issue with debt consolidation is that they provide a service that the client could perform on their own. They basically let all the credit card debt charge off, then send settlement offers to the organization that holds the debt for a percentage of the outstanding balance. This could be done by the client and the client would then save all the fees associated with the debt consolidation agency. The other thing most debt consolidators do not tell their clients is that they will be forced to pay 1099 tax liability on the difference between the original amount owed and what the debt settled for from the debt settlement. They also do not tell their clients that the debt settlement is extremely damaging to their clients credit score for years. In the end you should consult an attorney to see about your bankruptcy options before you talk to a debt consolidator, in many cases bankruptcy is the better option.