Debt and loan consolidation is the process of taking all or some of your debts and putting them all together. Many people use consolidation for a number of reasons and there are different ways to do it. During the home refinance boom in the mid 2000's, many people refinanced all of their debt into their home loans. The thought was that they could take their high interest debt and put it into a loan with a much lower interest rate. However, the flaw many failed to realize was that they would be paying on this newly consolidated debt for 30 years, no reduction in interest rate was going to save them money over that 30 year period. Others have used specific consolidation loans to lump all of their debt into one easily trackable payment. Regardless of the form and nature, the basic promise behind consolidation is that by lumping all your debt into one loan, you should be able to reduce your interest rate and make it more "affordable" or "payable".
In theory, consolidating debt appears like an attractive and viable solution to dealing with debt. However, research and history has shown consolidation rarely works out, and my experience as a bankruptcy attorney tells me that in the long run, people do not save money but in fact it ends up costing them more. You can learn more about why consolidation seldom works by reading 4 Consolidation Traps to Avoid published by US News and World Report in April of 2013.
Even finance guru's like Dave Ramsey admit that consolidation services do not work and are nothing more than a "con". Read, The Truth About Consolidating Debt by Dave Ramsey.
There do exist few somewhat reputable consolidation services, but many consolidation companies are nothing more than scams taking advantage of people with serious debt problems by preying on the fear which comes from the stress of debt. Many of our former bankruptcy clients have tried consolidation companies and they all reported the same thing, it cost them a lot of money for the service but the balance of their debt did not change or did not change significantly.
Rather than waste your time, money and sanity on consolidation, Congress has provided another option to get yourself out of debt. If you are in debt, and you have no foreseeable means of being able to pay it off, you still can qualify for help.
By filing for relief under the Bankruptcy Code, people have a variety of options to get their financial lives back on track. Chapter 7 is a complete fresh start, by filing Bankruptcy under Chapter 7 you are able to wipe out almost every kind of debt you may owe and start for your financial life over with a clean slate. It's life hitting the restart button.
Chapter 13 works as a structured payment plan, allowing you to pay back some debt in a time frame and in an amount you can afford. Chapter 13, has many advantages that Chapter 7 does not, such as; stopping the interest and penalties on tax debt, saving a home that is about to foreclosed, and in some cases Chapter 13 allows you to strip off negative equity in the car you own. This means you pay what the car is worth and not what the loan balance is.
Also, many have reported that the time frame for getting your financial life back through bankruptcy is much faster than using unproven debt & loan consolidation.
Speak to a licensed practicing bankruptcy attorney where ever you live to learn the benefits for dealing with your debt through bankruptcy.