Debt Consolidation And Scams, Fantasies, And Wishful Thinking

One scam making the rounds on the Internet is called Government Grants. They say you can apply for a government loan for debt consolidation, to pay student loans or just about anything. Is this really true? Not really. Government grant money is available to encourage specific purposes.

One example would be grants to get people to put up solar reflectors on their roof. Grants for people in general or certain types of people to start small businesses may be available. Grants not available include, to build a vacation home in the Poconos.

Perhaps you would prefer a new type of debt consolidation company making the rounds which tells customers that they have a new system where you just dont have to pay your debts. You have to pay them money and join their system, and then you will find out the secret knowledge. How could this be possible? The company, says that U.S. banking laws actually prohibit the lending of money at interest and that the courts have backed this up. You dont have to pay your debts because they were not legal in the first place. Somehow this is supposed to not damage your credit rating.

The problem is that the courts never made such a decision. If you legally contract with someone to get a loan to buy something, then you are obligated to pay your debts. We have a system that you can file bankruptcy and so on, only because we gave up the old debtors prison system from old England, as an infringement of liberty. However, your credit rating will still go down to zero, if you believe these charlatans, and even lower than zero, if you actually give them money.

Another interesting scam in the debt consolidation business is actually geared to after you file bankruptcy. The person, who is bankrupt, is promised to avoid the penalties of bad credit by creating a new identity. This is called, at least when marketed, File Segregation. By creating a new identity, the person hopes to avoid the stigma and problems of no credit, and start over. The main problem is that this is totally illegal and can result in fines and jail time. The companies pushing this flimflam tell you that if you file that, you will not have access to any credit for 10 years. Ten years is the time that a bankruptcy filing stays on your credit record. With todays exotic, inventive credit schemes, even the last statement isnt true. Remember those credit card offers in the mail every week?