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When you work with an attorney, you will have no problem reducing the risks associated with getting your case in front of a judge and jury, or other formal court, when you need to. However, every case is different. It is important to work wi Bankruptcy is a situation, wherein an individual is termed as unable to discharge all the debts. When a person or a company is not able to pay off its creditors, it has an obligation to file a bankruptcy suit. In fact, a bankruptcy suit is a

In my years of experience practicing bankruptcy, I have seen clients file bankruptcy cases for many different reasons. But, for me, the most frustrating trend is the very high number of clients who seek bankruptcy advice after working with debt consolidation companies. Almost every week I consult with a family who has spent years paying thousands of dollars in a debt consolidation plan without ever freeing themselves from debt. After all the time and effort put into the debt consolidation plan, they end up hiring my office to file their bankruptcy case anyway.Seeing so many clients struggle in these programs made me realize that most people do not have a clear picture of how debt consolidation works. Most people believe that bankruptcy will ultimately destroy them financially, and go to great lengths to make sure that they avoid bankruptcy at all costs. Unfortunately, debt consolidation can harm your credit score just as much as bankruptcy in the long run — without getting rid of all your debt.This article is written to explain how debt consolidation works, and why many clients would be better off filing for bankruptcy instead.How Debt Consolidation WorksWhen you sign up to do debt consolidation you must immediately stop making payments on all of your unsecured debts (ie. Credit cards). The debt consolidation company will then have you make a monthly payment into a trust account. The idea behind debt consolidation is that you build a pool of money in that bank account. Once the pool gets big enough, the debt consolidation company starts to negotiate and pay off of your debts with those funds.What Debt Consolidation Companies Don’t Tell YouWhat  debt consolidation companies  often don’t tell you is that each month you don’t pay your credit cards, your credit score takes a hit. If it takes two years to save enough before the pool gets big enough to start negotiating your bills, then your credit score has been consistently declining over that two year period of time. Also, debt consolidation companies don’t have the power to stop your unpaid bills from filing a collection lawsuit against you. If you get sued for non-payment while you are trying to save enough to start negotiation, your credit takes an additional hit from the lawsuit and a judgment could be entered against you, dropping your score further. Once you have been sued and the collector has a judgment against you, that collector can start garnishing your wages and levying your bank accounts. Debt consolidation does not have the power to stop garnishments or levies either.Debt Consolidation Costs a Lot Over TimeMost of debt consolidation companies get paid by taking a percentage of the monthly payment that you put into the trust account. Taking 10% of the monthly deposit you put into the trust account is not uncommon as a debt consolidation fee. Practically speaking, the longer it takes you to save up a pool of money, the more debt consolidation companies get paid. Debt consolidation companies also cannot guarantee how long it will take to negotiate your debt. If, after two years of pooling money, the credit card companies won’t settle for the amount that you have pooled, then it’s back to depositing more money into the trust account to try and pool a greater balance, all while the continuing to not make payments on your unsecured debts and seeing your credit score decline.Who Debt Consolidation Works Well ForThis is not to say that debt consolidation is always a bad plan. For people who have access to a pool of money to start out (such as an inheritance or gift from family) debt consolidation makes sense because you should be able to settle your debts quickly without missing many months of credit card payments. If you don’t have to pool money over a long period of time, then you can also save a lot in consolidation fees. When you start out with a pool of money to place, the debt consolidation company can begin negotiating your debts immediately so that you have less time you missed payments on your credit. Consolidation may also be appropriate for people who have a lot of extra income each month, so saving a pool of money can be accomplished easily. The problem is that most people who go through debt consolidation do not fit under this category.Why Bankruptcy May Be a Better AlternativeMost clients who end up hiring my office after attempting a debt settlement program have said that looking back, bankruptcy would have cost them a lot less, been completed faster, and would have gotten rid of all their debt promptly. They often regret not consulting with a bankruptcy attorney early on to understand how bankruptcy may be able to assist them. In speaking to bankruptcy clients who attempted debt settlement in the past, there are some common reasons why bankruptcy was a better alternative for them in the long-run.You’ll Know Exactly When You’ll Be Debt FreeWhen you hire a bankruptcy attorney to file your case, a reputable attorney will be able to tell you exactly how long it will take to complete your bankruptcy case. Under bankruptcy rules, the debt you owe will be considered wiped out as of the date your bankruptcy case is filed. This means that as your case moves through the court system, you are not taking monthly hits to your credit while you are waiting for the case to be approved. Your credit score will take the one-time drop due to the bankruptcy filing, not a lengthy downward spiral with no definite end in sight. As soon as your case is over, you can immediately begin the process of rebuilding your credit.Bankruptcy Stops Lawsuits, Bank Account Levies, Garnishments and ForeclosuresThe filing of a bankruptcy case will immediately stop collections lawsuits against you. It will also stop bank account levies, garnishments being taken from your wages, and foreclosures. The ability to stop these legal actions against you comes directly from a US Bankruptcy Court Order giving you automatic relief from your creditors. If a creditor continues to pursue collections against you, then you can petition the Bankruptcy Court to assist you in getting relief from the harassment.You Have a Court Order Protecting You From Creditors in the FutureOne bankruptcy case will take care of all of the debt you have. You do not need to approach every individual creditor to separately negotiate your debts. In the event that you have trouble with a creditor in the future, you have a court Order that formally discharges your debt. If a creditor refuses to acknowledge that their debt was wiped out in bankruptcy, you can petition the United States Bankruptcy Court to assist you in enforcing your court Order.You’ll Know the Cost Up FrontAll attorneys are required to provide their clients with written fee quotes at the time you hire the attorney to take your case. This means that you will have a written agreement with regard to the amount of fees that you will have to pay. Knowing exactly how much your case will cost means that you can begin saving to pay your attorney’s fees immediately. You can also conduct a cost-benefit analysis to determine if the bankruptcy attorney fees are worth the amount of the debt you are getting rid of.You Can Confirm that Your Attorney is ReputableBankruptcy attorneys are regulated by the State Bar, meaning that they are held to ethical standards, reasonable fees, and have been licensed certifying competency in their field. When you hire a bankruptcy attorney, if they do not deliver on their promises, you can report them to the State Bar for misconduct. Also, even before hiring a bankruptcy attorney, you can view their profile on their State Bar website to confirm that they have no history of complaints against them from past clients. There is no similar agency governing debt consolidation companies.No matter what path you decide to take for debt resolution, I recommend that you at least speak to a licensed attorney to discuss all available options. The Law Office of Kristy Hernandez offers free consultations on all bankruptcy cases at both the Sacramento and Newark California locations. For more information about the bankruptcy process, please call Kristy Hernandez, Bay Area Bankruptcy Attorney for a free consultation at 510-456-7400 or visit her at http://www.khernandezlegal.com