Thousands of Americans find themselves in debt. It isn’t hard to see why. With car loans, credit cards, and mortgages, the average American feels like they have to take on debt in order to function in society. However, for some people, this debt gets out of hand. They cannot pay it down and it grows larger instead. When this happens, you must take action. For many people, debt consolidation is an accessible way to start paying down debt. However, it isn’t always enough.

 

What Is Debt Consolidation?

 

First, let’s explain what debt consolidation is. Debt consolidation is when multiple debts are combined into a single new loan. Instead of dealing with multiple bills and interest rates, you make one monthly payment to one lender, simplifying your finances and potentially saving money on interest. To participate in debt consolidation, you must secure a loan or a line of credit large enough to cover your total outstanding debt. This loan is then used to settle your debts with other lenders. Debt consolidation has helped thousands of people get out of debt, but it doesn’t always work. Let’s look at some of the red flags that will show if debt consolidation isn’t enough for you to get out of debt.

 

Your Monthly Payments Are Still Too High

 

Debt consolidation does not get rid of debt. It simply reorganizes it. For this reason, your monthly payment may be about the same as the total of your old multiple monthly payments. This means that you may find it too high. If you are struggling to make your monthly debt consolidation payment, or if it is making it difficult for you to afford basic necessities, then the payment is simply too high. Your debt has outpaced your income, no matter how it is reorganized.

 

You Are Using Credit Cards Again

 

Once your debt has been consolidated, you should really avoid using credit cards until your debt is fully cleared. If you find that you have to use credit cards, it is a sign that debt consolidation may not work for you. It is likely that credit cards are what started your debt in the first place. By using them again, you have restarted the cycle of debt. Ideally, your debt consolidation loan should be your only debt until it is completely paid off.

 

Your Debt Continues to Grow

 

After debt consolidation, your debt should continuously get smaller, not larger. If your debt continues to grow due to new loans, then debt consolidation will not be successful. Your debt will just continue to grow until it once again becomes unmanageable. If your debt continues to grow, then you really need to seek other options quickly before you dig yourself into a deeper hole of debt.

 

You’re Falling Behind on Essential Bills

 

There are some bills that are essential. This includes:

 

• Mortgage payments
• Utilities
• Groceries
• Medical expenses

 

If you are falling behind on these types of bills after debt consolidation, it is a serious red flag. Debt consolidation should improve financial stability, not create additional hardship. If your financial situation still feels strained, then debt consolidation was not enough for your level of debt and you will have to take a different approach.

 

Other Debt Relief Options to Consider

 

Luckily, just because debt consolidation hasn’t worked does not mean you are out of options. Your best option may be to declare Chapter 7 bankruptcy, also known as liquidation bankruptcy. This is when all of your no-exempt assets are sold and used to pay off your debt. Should you go this route, be sure to hire a Chapter 7 bankruptcy lawyer. They will be able to help you through the entire process and make sure you are treated fairly. Declaring bankruptcy may seem drastic and scary, but sometimes it is the best thing you can do. Once it is over, you can focus on rebuilding your financial situation and avoiding massive debt in the future.