As a Bankruptcy Attorney handling cases from Macomb, St. Clair, Sanilac, Oakland and Wayne Counties, I have seen firsthand the dramatic increase in people overwhelmed by debt. To be accurate, lots of people filing today are more underwhelmed by income than they are overwhelmed by debt. In times past, they were able to keep up with the bills, but with job losses climbing to record highs, and those lucky enough to have jobs often taking pay cuts, there's just not as much money to go around as there once was.

One of the fastest growing industries, and their ads are seen and heard virtually everywhere in the Detroit area, is the Debt Consolidation Business. They offer to lower your payments, and reduce your debt. Debt Elimination Programs promise to just get rid of your debt, or at least wholesale chunks of it. Debt Settlement Companies lure you in with assurances that they can negotiate lower balances, lower payments and lower interest rates. What's so troubling about these fancy sales pitches is how they automatically portray Bankruptcy as something that often can and should be avoided. I could write (and probably will) article after article about how misleading this whole ad campaign is, but for this installment, I want to focus on a mostly overlooked fact about Bankruptcy versus Debt Consolidation. I'll save the "why Bankruptcy is Better" argument for another day.

How are these supposedly "non profit" Credit Counselors and Debt Consolidation Companies able to produce Hollywood-quality ads that run again and again, on all the big networks, and during prime-time? Where do they get that kind of money? When was the last time you saw a Red Cross, United Way or Easter Seals ad half as slick as those offering to "help" you out of debt?

The plain truth is that these businesses make a lot of money . Truckloads, in fact. They make money in several orders of magnitude more than all the Bankruptcy Attorneys and Law Firms put together. And do you know how many of them make that money? On fees charged or "donations" from their clients. Where else does the money to run those ads come from, the sky?

As much as I (and many others) have been critical of Radio huckster Dave Ramsey and his expensive line of books and programs that promise financial freedom, I have the exact opposite feelings about Suze Orman, perhaps one of the best people to bring accurate, real and common sense financial advice to our attention. The big difference between the two is that Suze will tell you, for free, how to get out of debt. Ramsey only offers his version of "help" in a series of expensive books and programs in an effort to do the same thing. Some help. MSNBC recently ran an article warning of Debt Settlement scams, and noted that any consumer who has enough money to pay their bills can negotiate any debt relief on their own.

In the video link toward the top of this post, Suze explains how and why you should run from all these debt-consolidation and debt-reduction schemes. While the video doesn't deal with Bankruptcy, in the first few minutes Suze explains how and why, if a person is truly and candidate for debt-settlement, they can do it on their own. They don't need any expensive service, nor do they need some expensive series of books and materials, in order to settle their debt.

For those (like so many Michiganders) who simply don't have enough money to even pay, much less pay off their bills, Bankruptcy remains a solid option for keeping the creditors at bay. Perhaps the most misleading statement about Bankruptcy that is repeated so much it seems to have taken on a life of its' own is that Bankruptcy can stay on your credit report for 10 years.

While that's true, it's also very misleading. The fact is that even today, in light of the Mortgage meltdown, a person with a Bankruptcy Discharge on their record can otherwise qualify for a conventional mortgage 3 years after the discharge (usually about 4 months after they file) has been granted. By contrast, it takes 4 years for a person with a foreclosure to qualify for the same mortgage. In other words, the Bankruptcy only affects you for, at most, a few years. You can recover from Bankruptcy relatively quickly, and in many cases much quicker than it would ever take to even pay off your debt under some long-term plan.

Most of my clients have a new credit card within months after their discharge, and are on their way to rebuilding their credit within that first year. Think of it this way: If you sign up for some expensive repayment plan, you'll likely spend the next 2, 3, or more years making your payments, and having absolutely zero money left over to do anything. Only when you're "out of the bucket" can you start to rebuild your credit. With Bankruptcy, you dump your debt the day you file, and 4 months later you start rebuilding your credit.

A fresh start should be just that; a fresh start, not a long, expensive journey to the starting line.