Debt Settlement vs. Debt Consolidation | McCarthy Law PLC
October 23, 2014

Debt Settlement vs. Debt Consolidation

Debt settlement and debt consolidation are not the same. We recommend debt settlement.

There are a lot of advertisements in California for debt consolidation. It may even seem like a good idea – until you take a closer look. At McCarthy Law in Los Angeles and San Diego, our lawyers want you to know all your options and the differences before you make a decision.

  • Depending on your specific circumstances, debt settlement may be the right solution for your financial problems. We can guide you through the process.
  • For some clients, bankruptcy may be the answer. An attorney at our firm will help you determine if that is the right option for you.
  • There is no situation in which debt consolidation is the right option. It does not reduce the amount owed, and you could still be sued by credit card companies and banks.

What is debt consolidation and why isn’t that a good choice?

In debt consolidation, all your unsecured debts are added up and then you will be given a single monthly payment. The person handling the debt consolidation will take your payment and divide it among your creditors.

What is wrong with that? In a California debt consolidation, when your debts are added up, all the inflated high interest and penalties will be added in, too. That makes your total debt higher than it should be-and it will take more money and time to pay it off. In addition, your credit score will still suffer from late payments and your credit card company will still cancel the credit cards you consolidate.

In debt settlement, on the other hand, your attorney will negotiate the pay-off amount with each creditor. In those negotiations, the focus is on the principal – the money you actually charged on your credit cards. We negotiate to remove high interest rates, the compounded interest that has built up over time and the late fees and over-limit fees.

Learn more about debt consolidation and debt settlement in Los Angeles and San Diego.

There is no pressure at McCarthy Law. We will take the time to explain your options so that you can make the right choice for you and your family. Our California attorneys will recommend what is in your best interest based on your specific circumstances. Contact Us for an appointment at our San Diego or Los Angeles office.

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