The Straight Facts about Debt Relief Options

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The Straight Facts about Debt Relief Options

What most people are looking for in a debt management program does not exist. I find myself constantly on the phone with clients who are drowning in credit card debt, looking for the perfect debt management program. This is the criteria they are usually seeking: - Eliminate all debts quickly - Have a positive effect on their credit - Not have to deal with any phone calls from creditors

The straight fact: That program does not exist!

What I have found over years of assisting clients out of debt, is that most are initially looking for a program that does not, and has not every existed. Let me be perfectly clear, there is no debt management program in existence, aside from just making all your payments on time, that will provide the above benefits. Now that we have that understood, let's talk about what options are available and in short summary; provide a basic understanding of each.

Debt Consolidation Loans: Debt consolidation loans are, in most cases, home equity loans or second mortgages. This is when you take the equity out of your home to pay off credit cards or other unsecured debts. The positive is that you can exchange your high-interest unsecured debts for a lower-interest, single payment that can sometimes have a tax benefit. The negative is that most people who have a lot of unsecured debt will not qualify for a loan, or have any equity in their home.

Consumer Credit Counseling: These are the companies that have been getting into a lot of trouble over past years. Typically non-profit, they claim to lower your interest rates and set you up with a low monthly payment to get you out of debt in 5-7 years by splitting your single payment into little chunks to pay each creditor a reduced payment. The upside is well there actually is no upside. Because these programs rarely ever do what they claim, and many credit card companies no longer participate in these programs, this has become a serious waste of money and time. The downside is, in addition to above, that your creditors will each enter a line into your credit reports on every account included that states that the account is handled through credit counseling. This will prevent you from qualifying for pretty much anything.

Debt Settlement / Debt Negotiation: This now seems to be the most popular and most effective option for getting out of debt fast, while avoiding bankruptcy. You must truly be in a financial hardship and not have an ability to pay your current payments. The strategy is to negotiate a settlement of far less than the current balance of each of your accounts. All companies will accept settlements on accounts held by people in a financial hardship. It has been apparent that attorneys and law firms are more effective in negotiations with creditors that companies that just use non-attorney staff. The good thing is that you can effectly eliminate your debts for a small percentage of what is currently owed. The bad thing is that you must allow your accounts to go unpaid and become delinquent before a collector will accept a settlement. Obviously, this is not a problem if you are legitamately in a financial hardship; since you cannot pay your bills anyway.

Bankruptcy: In past years, anyone could file bankruptcy chapter 7 and easily eliminate any amount of debt quickly. Now, since the Bankruptcy Reform Act, most do not qualify for bankruptcy, and you are forced to try other solutions such as debt settlement first. Bankruptcy is a legal court process where those who are completely insolvent are able to possibly protect their primary residence and eliminate debts. The upside is that once a chapter 7 bankruptcy is completed, the creditors literally write off the debt and cannot pursue you further. The downside is that it is a permanent court record, and will also remain on your credit reports as a public record for up to 10 years.

I hope you find this information helpful, and that it provides you with a foundation that will allow you to choose the best plan given your circumstances.

Article Source: Credit Card Bad Credit People

About the Author

Jon Ochs is the President/CEO of NCA Credit Repair, Inc, and a well respected authority on Credit Repair, and Debt Relief.

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What most people are looking for in a debt management program does not exist. I find myself constantly on the phone with clients who are drowning in credit card debt, looking for the perfect debt management program. This is the criteria they are usually seeking: - Eliminate all debts quickly - Have a positive effect on their credit - Not have to deal with any phone calls from creditors 
The straight fact: That program does not exist! 
What I have found over years of assisting clients out of debt, is that most are initially looking for a program that does not, and has not every existed. Let me be perfectly clear, there is no debt management program in existence, aside from just making all your payments on time, that will provide the above benefits. Now that we have that understood, let's talk about what options are available and in short summary; provide a basic understanding of each. 
Debt Consolidation Loans: Debt consolidation loans are, in most cases, home equity loans or second mortgages. This is when you take the equity out of your home to pay off credit cards or other unsecured debts. The positive is that you can exchange your high-interest unsecured debts for a lower-interest, single payment that can sometimes have a tax benefit. The negative is that most people who have a lot of unsecured debt will not qualify for a loan, or have any equity in their home. 
Consumer Credit Counseling: These are the companies that have been getting into a lot of trouble over past years. Typically non-profit, they claim to lower your interest rates and set you up with a low monthly payment to get you out of debt in 5-7 years by splitting your single payment into little chunks to pay each creditor a reduced payment. The upside is well there actually is no upside. Because these programs rarely ever do what they claim, and many credit card companies no longer participate in these programs, this has become a serious waste of money and time. The downside is, in addition to above, that your creditors will each enter a line into your credit reports on every account included that states that the account is handled through credit counseling. This will prevent you from qualifying for pretty much anything. 
Debt Settlement / Debt Negotiation: This now seems to be the most popular and most effective option for getting out of debt fast, while avoiding bankruptcy. You must truly be in a financial hardship and not have an ability to pay your current payments. The strategy is to negotiate a settlement of far less than the current balance of each of your accounts. All companies will accept settlements on accounts held by people in a financial hardship. It has been apparent that attorneys and law firms are more effective in negotiations with creditors that companies that just use non-attorney staff. The good thing is that you can effectly eliminate your debts for a small percentage of what is currently owed. The bad thing is that you must allow your accounts to go unpaid and become delinquent before a collector will accept a settlement. Obviously, this is not a problem if you are legitamately in a financial hardship; since you cannot pay your bills anyway. 
Bankruptcy: In past years, anyone could file bankruptcy chapter 7 and easily eliminate any amount of debt quickly. Now, since the Bankruptcy Reform Act, most do not qualify for bankruptcy, and you are forced to try other solutions such as debt settlement first. Bankruptcy is a legal court process where those who are completely insolvent are able to possibly protect their primary residence and eliminate debts. The upside is that once a chapter 7 bankruptcy is completed, the creditors literally write off the debt and cannot pursue you further. The downside is that it is a permanent court record, and will also remain on your credit reports as a public record for up to 10 years. 
I hope you find this information helpful, and that it provides you with a foundation that will allow you to choose the best plan given your circumstances. Article Source: <a href="http://www.allbestarticles.com" target="_blank">Credit Card Bad Credit People</a> About the Author: Jon Ochs is the President/CEO of NCA Credit Repair, Inc, and a well respected authority on <a href="http://www.ncacreditrepair.com">Credit Repair</a>, and <a href="http://www.edebthelp.com">Debt Relief</a>.