Long Beach, California, is part of the greater Los Angeles area. This sprawling metropolis comprises the third largest city economy, measured by gross metropolitan product. The city of Long Beach has a relatively low unemployment rate and its economy is dominated by the Port of Los Angeles, the most important port in the Western Hemisphere, and all of the businesses and industry which derives from it.
The greater Los Angeles area has one of the most thriving and diverse economies of any city, not just in the U.S. but in the world. It is the seat of the American film industry, a major traditional center of aerospace development and manufacture as well as, arguably, the most important manufacturing center in the United States. The land of opportunity that has been the Los Angeles basin over the past 200 years shows little sign of stagnation.
Still, all of these superlative measures of economic success conceal a larger reality for millions of Long Beach and Los Angeles residents. The spoils of this high-power economic engine are not distributed remotely equally. The relatively low unemployment rate doesn’t tell of the estimated 1,000,000-plus illegal immigrants who currently reside in the Los Angeles area, many of whom live within Long Beach itself, who don’t participate in the official economy. Long Beach also has a large minority population that has been historically economically disenfranchised. This adds up to a portrait somewhat less pristine than the raw economic data would indicate.
Add to this California’s enormous cost of living and suddenly the fact that the Golden State leads all others in declarations of bankruptcy begins to make perfect sense. In truth, residents of California as a whole and Long Beach in particular are plagued by economic insecurity, and many are only one missed paycheck away from financial crisis.
Luckily, for those Long Beach residents who are faced with the suffocating feeling of falling ever deeper into debt, there are options besides declaring bankruptcy. For these hardworking people, debt consolidation may be a far better option.
Many debtors may benefit enormously from debt consolidation. But it’s also important to know who debt consolidation won’t be likely to help. Speaking broadly, there are three conditions that must be met before debt consolidation should be considered. First, the debts should be unsecured, that is, not backed by collateral. There are some situations where it may be possible to consolidate collateralized debts, but the vast majority of cases involve unsecured consumer debt.
Second, the debtor should be sure that the habits or incidents which led to the debt accumulation in the first place are not at risk of being repeated. There’s no point, indeed it can be detrimental, for someone who is likely to continue incurring debts to consolidate existing loans. The underlying behavioral problems must be addressed.
Lastly, there must be sufficient income relative to the debt size. Generally speaking, the debtor should have a realistic chance of exiting debt within three to five years once on the repayment plan. If it is projected to take longer, declaring Chapter 7 bankruptcy and walking away start to make much more sense.
It’s important to point out that there are certain types of debt which can never be consolidated outside of special circumstances, usually involving government intervention. Such debt types include alimony, child support, student loans and any type of court judgment.
There are other situations where debt consolidation loses its allure. The reason that someone would want to be sure they can completely and permanently exit from debt within three to five years using debt consolidation are that the worst effects of declaring bankruptcy only tend to last seven to ten years. For someone with tens of thousands of dollars in debt who wouldn’t be able to repay it in a reasonable time frame, the benefits of eliminating the debt outright through Chapter 7 can outweigh the costs of having a permanently scarred credit history as well as not being able to get any kind of financing for the better part of a decade.
However, for those who can pay down their debts, consolidation can potentially save tens of thousands of dollars. In fact, in many cases, consolidating debts then paying down the balance will actually save the consumer more in the long run than they would have saved by eliminating their debts through bankruptcy.