Debt Consolidation Loans

In Murrieta and Temecula there are great places to obtain debt consolidation loans.  In many cases a debt consolidation loan is a fantastic financial tool for restructuring your debt and making life easier and finances manageable.  Particularly when your debts are for the types of obligations that are not revolving or renewing. 

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need.  A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes.  You can reduce a car payment, both by cutting the interest rates and extending the term of the loan and paying it off ahead of the credit cards.  You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too.  Your credit cards and medical bills and gambling markers get paid whatever is left over. 

Example: if you owed $15000 on a car, $15000 in back child support and $30,000 to credit cards, and if your budget only allowed a payment of $700.  You’d setup a 60 month plan for $700/mo.  Normally you’d have to pay probably $1500 to $2000 per month on that debt depending on interest rates and terms.  Of the $700/mo that you would pay for the 60 month plan, your credit cards would get approximately only $200/mo.  Less in fact because the bankruptcy trustee would take his fees out of that $200 and also the car would have a small interest rate applied but not compounded.

Recent Taxes

While sufficiently old enough income taxes can be discharged in a bankruptcy, more recent income taxes cannot be.  Income taxes that date back only one, two or three years cannot be discharged in bankruptcy.  This is true in California for the Federal and State income taxes as well as California Sales Taxes.  If the debt is sufficently high you may want to consider waiting out the time required and then filing a bankruptcy when they are ripe enough to do a bankruptcy. 

However, if the debt would be manageable if you just had a low interest rate and a fixed payment for 36 or 48 or 60 months, then a debt consolidation loan might be right for you.  Keep in mind that the interest that the IRS charges is 10% but on top of that, stiff penalties are added whenever the debt has a remaining balance.  If you set up a minimum payment plan directly with the IRS, you’re having more than a 20% interest rate and unpaid interest and penalties are capitalized back into the loan.  Worse is that if you end up owing money next year your payment plan will be cancelled and the full balance on both years will be immediately required by the IRS.

A Debt Consolidation Loan may be exactly what you need in this situation.  As a quick side note there is a special bankruptcy rule which states that if you obtain a loan to pay a tax and then try to discharge the new loan in a bankrutpcy, you must follow the same bankruptcy rules as though it were still a tax in order to discharge it.

Student Loans and Back Child Support 

Neither of these is dischargeable in bankruptcy.  However, neither Student loans nor Child Support have that same rule as the income taxes.  If you obtain a consolidation loan to pay off student loans or child support, and you later find yourself unable to pay off the new loan, there is no bankruptcy rule forcing you to follow the student loan bankruptcy rules nor the child support rules for the consolidation loan.  So, they get discharged.

There are plenty of student loan debt consolidation programs and some have 20 year payment plans, or extended plans and some have income contingent plans.  However my favorite is to just get a normal consolidation loan.  It does better things for your credit files and credit scores and if you fall on hard times afterwards, you can discharge it in a bankruptcy. 

Open Credit Cards with Zero Balances

By far the worst thing you can do is to consolidate credit cards with a new loan or line of credit.  Examples I’ve seen come into the office include but are not limited to the following, a couple has $60,000 in debt consolidation loans and another $60,000 in revolving credit on 10 different credit cards.  Ike, the husband had gambled up $60,000 in credit cards so his wife, Inez went to the bank and got a consolidation loan and paid them off.  However, it left 10 credit cards open with zero balances.  

That’s like handing an open bottle of Rum to an alcoholic pirate; no impulse control and he gambled them all up again.  

In Murrieta and Temecula, if your debts are primarily credit cards consider filing chapter 7 bankruptcy or if you make too much money, file a chapter 13Imagine how much happier Inez would be if she’d talked him into filing a bankruptcy instead of running up the 10 credit cards over again.  How many arguments about money could have been avoided?  How many arguments did they have about the low income, the missed vacations, missed investments, missed retirement savings? If those credit cards had been closed permanently, they might have stayed married. 

I’ve seen a spouse get a consolidation loan, and then call all the credit card companies and close the accounts.  It didn’t work.  The other spouse just called all the credit card companies the next day and asked for the cards to be opened back up again.  And the credit card companies did it.

If you’re considering a debt consolidation loan, a chapter 13 bankruptcy may be just what you need.  A chapter 13 bankruptcy allows you to consolidate your debts and separate them into classes.  You can reduce a car payment, both by cutting the interest rates and extending the term of the loan, and you pay it off ahead of the credit cards.  You can include child support and income taxes and give them a higher priority in the payment plan so that they get paid off completely and ahead of the credit cards too.  Your credit cards and medical bills and gambling markers and whatnot get paid whatever is left over. 

All the cards are closed and no one is going to call back and reopen them either.  Call me now and lets get you started doing something about your debts.  Take action and fix your finances.  951-200-3613.

Debt Consolidation

Non-Profit Debt Consolidation

There are tons of non-profit debt consolidators in the Murrieta and Temecula areas.   In general what they do is, set you up with a debt consolidation plan.  One place put it this way, “You will be able to combine most, if not all of your unsecured debt and make one single monthly payment.” Your accounts don’t vanish, you haven’t done a consolidation loan, but instead the debt consolidators pay your various accounts monthly as you pay the debt consolidation company.   They claim that you will become more organized and eventually learn to understand your finances better through participation in the program.  Finally they stated that debt consolidation “may reduce” your payments. 

You may have heard that “those who can’t, teach.” Well, if someone wants to teach you about your debts, ask yourself how much they can do about it? (As an aside, most of the teachers I know are quite able and deserve more than they’re getting right now, but these debt consolidators are often not even college grads.)

Hmmm, “May Reduce”?  Wait a minute, isn’t that why you are thinking about contacting these people in the first place, because you don’t have the income currently to meet all the financial obligations that you have right now?  I doubt that’s the deal your looking for. I expect you’re looking for a will-reduce-your-payments type of plan.  Certainly there are a few of you who can afford all of your debts and are just looking for a way to get organized and if that’s the case, maybe a debt consolidation company is right for you.  But if you’re like most people who are looking into this you’re probably looking to make a bit more progress than that.

What most of these companies will tell you that they do is that they contact your credit card companies and medical bills and what not, and they negotiate a payment for you.  Either they are going to try to reduce the principal, interest, extend the term of the contract or a combination of them. 

But what they do not tell you is that, if they’ve been doing this for a while, they already know which of your credit cards are going to play ball with them and which will not.  How could they not know?  Think about it.  However, they will never tell you that you have a  card or account that won’t want to participate. 

So, they set you up with a debt consolidation payment plan and never tell you that one of your accounts didn’t like the terms and decided not to participate.  Instead, after getting a reduced payment or even no payment at all, 6 months or 10 months later, that card sues you.  You call up and exclaim, Wells The Fargo!  Why am I being sued? And the debt consolidators tell you, “oh goodness, it appears that they’ve decided not to participate.”  At that point you’re going to have to file bankruptcy before you have your wages garnished or a bank levy hits your checking and savings accounts. 

And why does that sweet little old non-profit debt consolidation company do that to you?  For the money!  Yes, fans that’s right, for the money.  Just because they’re not for profit does not mean that the officers of the company don’t take a huge salary.  It just means that they cannot declare a dividend to share holders.  So, what difference does it make?  Answer: You’re paying bankruptcy prices to non-lawyers for a non-legal service without the great results you’d get if you simply filed a bankruptcy instead.

So wait a minute, you’re only paying them $20/mo and about $300 down to set it up, right? (low end some charge you thousands)  That’s a lot of months that they’ve set up your payment plan for.  How much did they tell you?  48 months?  36 months?  36 x 20 = $720 and if they have 500 of you making payments through this type of plan that’s $10,000/mo plus $150,000 in set up fees. And as one debt consolidator put it, “I keep the float.” Meaning every month he’s got tens of thousands in his accounts collecting interest from his bank and he absorbs that interest for himself.  And for all that they “may reduce” your payments which means that one of the credit cards may not participate and will sue you.  Maybe not but good luck getting a guarantee out of them.

Chapter 13 Bankruptcy

Do you know what one is?  It’s a debt consolidation plan with the Federal Bankruptcy Code behind it backing you up and forcing your creditors to listen up and back down.  Creditors must take the plan.  I love it, we reduce interest rates on creditors to 0% and often reduce principals down to 5% or 10% of the total balances. 

Try as you might, you could pay off all your debts if only you didn’t have those pesky 20% to 29% interest rates.  With interest rates like that it will take decades to pay off your debt if you paid only the minimum payments.  They will just never let you pay down the principal. And it will be literally decades.

What if you owed say $60,000 in credit cards, medical bills, a repossessed car, and a student loan?  That would cost you $1000/mo . . . if you didn’t have to pay all that interest.  But with all the interest, late fees and penalties, you’re looking at monthly payments of $1500 to $2000/mo.  Maybe more.  Without the interest, penalties and late fees aren’t things tough enough already in Murrieta or Temecula?

A Chapter 13 bankruptcy gives you leverage that the debt consolidators only wish for.  You can force the credit cards, student loans and medical bills to take 0%.  If that’s all you can afford, then 0% interest.  If you can afford only $500/mo, guess what, then they get only about 50% of the principal. 

And none of them can sue you either, and if they want to opt out and not participate, they can, but what they’ll get is 1) they can’t sue you and 2) they get paid nothing at all.  Call me for more information on how to you might qualify for this type of bankruptcy debt consolidation.

Oh, and let’s keep it real, yes I do it for the money, but I’m also an attorney with years of experience offering a real solution to a very real problem. Not a way to “learn about” or “understand” your debts.  Let’s do something about it.  Call now 951-200-3613.