Explore your Debt Options
Struggling with credit card debt is stressful. Before entering into any type of program to help you manage or eliminate your debt, you should be aware of any potential consequences and benefits associated with each of them. Below are what we consider your most viable options to consider to eliminate your debt. Please feel free to contact our office with any questions you have regardless of whether you choose debt settlement as your method of debt resolution.
Option 1: Continue to make minimum payments.
With this option, it would take over 30 years to get rid of your debt. That is longer than it takes to pay an entire mortgage! Plus, 85% of your minimum payment goes toward interest. Of course, if you can afford to pay your creditors, it may be in your best interest to do so. There are severe credit consequences if you default on your payments. While it still baffles us that it is legal for credit card companies to increase your interest rate without notice, and with little potential legislation slated to change the bank's current ability to further increase their interest rates, this is still the most viable option for someone who hasn't faced a particular hardship.
Option 2: Debt Consolidation.
Consolidation loans really encompass more than just taking a loan from a bank, but for the purposes of this option, we will consider it a secured loan against collateral you own (generally a house). Most financial advisors will tell you to never turn an unsecured debt not attached to any collateral into a secured loan. You can face severe consequences if you default on the loan, you can lose your property, your home, or any other asset you attached to the note. A consolidation loan will only increase your debt. Borrowing even more money could be dangerous to your debt situation and credit standing. You are expected to pay back all of your debt, in full, with interest. Again, you may put your home at risk by using equity to cover your debts. The plus side of this option is that if you never suffer any type of financial hardship such as unforseen medical bills or a job loss, you will pay a lower interest rate versus your credit cards in most cases.
Option 3: Consumer Credit Counseling.
The goal of a credit counseling program is to reorganize your debt with creditors to pay off your debts. Because these "Non-Profit Organizations" work for the creditor as an extension of their collection department, they have a list of predetermined agreements to lower your interest or payment to a minimum acceptable amount. Frequently, these new minimum payments are higher than your current payment structure. While some may be able to lower your interest rate to 10%, others refuse to drop below 24% or more. Even if you qualify for this program, it can still take you seven to ten years to pay off your debt.
Once you are accepted, they report that you are enrolled in a financial hardship program to the various credit agencies. For most lenders, this report is viewed as damaging as a Chapter 13 Bankruptcy to your credit score.
You make a monthly payment to the Debt Management Program and they disperse payments to your various creditors in return for a percent of your payment as a "collection fee" or "fair share" contribution.
Although there may be several good credit counseling companies out there, there has been a lot of leglislation over the past few years because of the number of complaints from clients of these type of companies. You should know that these companies ARE FUNDED BY THE CREDITOR, and receive what is called a 'fair share' contribution that is a percentage of your monthly fee. They also charge you a monthly fee, which they may not be entitled to in some states. In 2006, the IRS audited more than 2000 of these 'non profit' companies alleging that they were acting as for-profit entities and charging excess fees to their clients. The largest of these companies, AmeriDebt, was taken down by the FTC for charging millions in dollars of fees they weren't legally entitled to receive.
Option 4: Bankruptcy.
Bankruptcy is a proceeding in a federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability. Chapter 7 of the Bankruptcy Reform Act deals with liquidation, while Chapter 13 deals with reorganization. Certain types of debt such as child support, tax debts, or certain new purchases over $1000 are not discharged through bankrutpcy. It also lasts your your credit report for up to ten years, and can disqualify you from certain employment opportunities and/or insurance coverage. We believe that bankruptcy should be considered a last resort, and that you should speak with an attorney if you believe this is your best course of action.
Option 5: Debt Settlement
Debt negotiation, or debt settlement can be a very effective method of resolving your unsecured debt. This program is most effective for people looking for a bankruptcy alternative, or are suffering from a particular hardship. A hardship could be a recent job loss, medical crisis, death or serious injury of a family member, or simply not being able to pay your regular monthly bills. This process involves negotiating with your creditors over time in an effort to reduce the principle balance of your credit card debt. As with any program, implementing this program carries consequences. While it is possible, and even likely that you will be able to get reduced settlement offers, this program will most likely cause your credit score to decline, you may be there could be potential legal action against you, and when you settle a debt, you may have to pay taxes on your savings amount.
You should consider all of your options carefully. If you choose debt settlement, consider purchasing our debt settlement kit. This package will teach you how you can negotiate the balances of your credit card debt, saving as much as 70% without paying a third party company thousands of dollars. We provide you with step by step instructions to deal with all phases of the collection process, and offer customer support for the first 30 days with out basic package, and ongoing support for a small fee should you require further assistance from us.
