Before consulting with me about a bankruptcy, many of my clients have tried debt consolidation, debt management or credit repair. Unfortunately, debt consolidation and the like are terribly ineffective.

First, many debt companies use most of the money you send to them to pay their own fees. Yes, bankruptcy attorneys also collect fees but, there is a marked difference in the fees attorneys collect and the fees debt companies collect. For instance, bankruptcy attorneys must have their fees approved by the bankruptcy court. This is not true of debt companies, and more often than not, debt company fees surpass attorney’s fees. In fact, I don’t think I’ve ever met a client whose debt management fees were lower than my attorney’s fees.

Secondly, you do not know who will be managing your account and working on your case at the debt company. It is very unlikely that anyone employed at the debt company is an attorney. In fact, it is very likely that the company does not even employ any licensed professionals at all. (Naturally, when clients are told this they feel very deceived.)

Third, debt companies cannot force your creditors to participate. You may not know this, but your creditors are not bound to follow the recommendations or demands set forth by your debt management company. For one thing, your creditors may still sue you even though you are attempting to pay them through your debt company. Actually, this is what leads many of my clients to file bankruptcy in the first place– they have been sued by one of their creditors despite paying a debt company to manage their debts! In contrast, when you file bankruptcy creditors are required to follow the bankruptcy rules and cannot take legal action against you without court permission.

Next, it is often the case that the debt company you have hired is only paying one debt at a time. These companies frequently try to pay off one card before paying off the others. Sadly, clients don’t realize that most creditors are unwilling to wait 2 or 3 years for your debt company to start paying them. However, once you file bankruptcy your creditors are not allowed to take any legal action against you without court permission. This is definitely not true with debt management.

For more information about debt management and credit counseling scams, please visit the Texas Attorney General’s website:


This website provides information about what to avoid and what to do if you have already been scammed by a debt company.

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