Government Debt Consolidation

Since the large Wall Street and corporate bailouts of last year

, many Americans are under the misimpression that there are also funds available to them. Unfortunately, there is no such thing as government debt consolidation.

Any number of debt relief companies have sprung up whose names seem to relate to the federal government. It is a way of marketing, and a way of getting consumer's attention. Companies seem to be everywhere, and most of them are in response to the growing number of Americans who have amassed large amounts of unsecured debt.

The elusive search for government debt consolidation leads consumers to essentially three types of debt resolution: debt consolidation, debt settlement and debt management. They only have one thing in common. The consumer ends up paying one monthly amount rather than a number of them.

Debt consolidation has long been a popular method of debt relief. Quite simply, the consumer borrows enough money to pay off all unsecured debt. This is done in the form of a loan, which is almost always a secured one. It is more frequently a second mortgage or home equity loan, or when it isn't, the loan is secured by another piece of collateral. The interest rates are low, but the pay out time is lengthy, which makes interest rates actually extremely expensive if added up for the course of the term.

Debt settlement and debt management also bundle the debts into one package, but rather than require the consumer to take out a loan, it works differently. The consumer works through a debt resolution company, and after deciding which creditors and debts to pay off, an insured account is set up. The consumer starts to pay into it, and once enough money is amassed, the debt resolution company will begin negotiations with creditors. Principle amounts are reduced by as much as half in many cases, and money from the special account is used to pay off those amounts. These types of negotiations don't work because creditors have hearts. It's still all about business. They fully understand that if a consumer opts for a bankruptcy option, they may receive nothing back. If they settle for a lesser amount, they will cover at least a portion of the original debt.

If one wants to consider that this willingness to make a deal is part of a government debt consolidation, it can be said that the creditors received portions from the bailout money, and one reason they got it was to give consumers a break. So, much of the percentage they end up renegotiating is covered by what they received from Washington.

by: Vicki Hall

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