Thomas F. Miles, Attorney and Counselor at Law
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Can consolidation help with unmanageable debt?

For many California consumers, a financial turning point comes with the realization that there is simply no way to gain control over one's current volume of debt. Unmanageable debt can be stealthy, as it builds in increments. People simply live their lives and find a way to make ends meet every month, until one day it dawns on them that continuing on that path is simply not possible.

One possibility for relief lies in debt consolidation. This is the process of taking out one large loan for the purpose of paying down multiple smaller lines of credit. Theoretically, the consolidation loan will have a lower interest rate than the other debts, which will save money over time as the total volume of debt is paid down. There is also an appeal of having just one monthly payment to make, instead of juggling many payments on different schedules.

That said, there are potential hazards within debt consolidation that must also be given consideration. For one, these offers often have hidden costs in the way of fees, fines and rates that creep up over time. In the end, many of these deals turn out to be no better than the scenario they were meant to relieve.

While there are debt consolidation programs that can work for some California borrowers, a far faster and more effective path to the elimination of unmanageable debt lies in personal bankruptcy. Bankruptcy can lead to the discharge of many forms of unsecured consumer debt, such as credit cards, medical bills and other outstanding obligations. When considering debt relief options, it is always best to fully research all of the available choices, and move forward fully informed of the pros and cons of each.

Source: Time, "Debt Consolidation Tips and Traps to Avoid", Carmen Chai, June 3, 2015

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