There are several options providing financial solutions from which
to choose for solving debt problems. Debt Settlement, Credit
Counseling, Debt Consolidation and Bankruptcy are the more common.
What is Debt Settlement
?
Alternative solutions based on your financial capability.
Debt Settlement Programs have
the greatest range of applications and are based solely on the
financial capability of the debtor-providing an alternative to
Bankruptcy. Our programs are flexible and can be modified to
accommodate special creditor offerings, as well as changes in the
debtor's income or expenses without disrupting the program. Those
who qualify for debt settlement could be out of debt in as little as
1 to 5 years. These programs provide creditors with an alternative
to costly civil litigation, which if successful for the creditor
often drives the debtor into Bankruptcy-from which the creditor
rarely recovers the debt-much less the cost of litigation.
What is Credit Counseling?
A greater than 70% Failure rate
Credit
Counseling programs were originally set up by charitable
(non-profit) organizations to help people who were experiencing
financial hardships. Creditors, after realizing that these
organizations were helping some people get back on track
financially, adopted a more formal program to contribute to their
efforts. Not only do Credit Counseling Organizations essentially
work for the creditors, and in many cases are actually owned by the
creditor and set up as a “non-profit”, they implement creditor
models which a lot of times out-perform the financial capabilities
of the client and subsequently have a greater than 70% failure rate.
And yes, they do get paid - by you in the form of monthly
contributions, and by the creditor under the "Fair Share
Contribution" based on how much they get you to send in each month
(usually 8-15% of what you send in). Not all creditors participate
and pay under the "Fair Share Contribution" program, which means you
will have to handle those creditor accounts left out of the program
on your own.
What Is Consolidation?
Converting unsecured debt to secured debt
Debt Consolidation may
provide a consumer with a home equity loan to help "consolidate" his
or her outstanding debts into one monthly payment. While debt
consolidation loans often offer consumers a lower overall interest
rate, the negative effect is that many consumers often find
themselves in a worse situation than before, and the only thing
they've really done is convert unsecured debt into secured debt,
jeopardizing their most valuable asset - their home. A creditor with
an unsecured debt cannot force the sale of your home, but failing to
pay the increased mortgage payment could result in the loss of that
property. Statistics show that 60% of those who use equity from
their homes to pay off unsecured debts find themselves in the same
position within five years.
What is Bankruptcy?
Only as a last Resort
Bankruptcy should only be considered as a last resort. Once filed,
bankruptcy will remain on your record for 7-10 years and could
affect your ability to get credit and/or better rates on some loans.
Newly passed bankruptcy legislation will make it more difficult for
debtors to file Chapter 7 and will require those debtors who don't
qualify to restructure and repay under Chapter 13 their unsecured
debts over five years. Even when a bankruptcy finally falls off the
credit record it will continue to impact you for the rest of your
life since most credit applications, job applications, etc. ask if
you have ever filed bankruptcy.
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