When you are facing a mountain of debt, everything can look hopeless and bleak. However you do have options. Some of these options are better than others, while some will work for you and some will not. The important thing to remember is there is a light at the end of the tunnel. You just don’t see it now. So let’s look at some of those options.
First there is debt settlement. Debt settlement requires negotiating with your creditors and credit card companies to settle on a dollar amount for you to pay the account in full as they forget the remainder of the balance. This will reduce the total amount you owe. Most creditors are willing to settle because they know if you file bankruptcy they will get nothing. As the debtor you can become debt free within 12 to 36 months rather than 20 years. You will notice a significant reduction in the amount of your monthly payments to the credit card companies. Debt settlement is a good solution for a debtor who is in serious credit card debit, usually about $10,000 or more, and is unable to make payments or is only able to make the minimum payments. Your accounts must be in arrears more than 3 months before a creditor will consider settlement.
The second is credit counseling. Credit counseling requires working with the credit card companies to have your interest being charged lowered. Using the credit counseling method of debit relief, a debtor can become debt free in about 4 or 5 years and they are able to save money on the high interest rates charged by the credit card companies. You must be aware of one fact. Credit counseling companies are set up by credit card companies to collect as much of their money as they can. Do not be lulled by their non profit status because any profit they make goes directly to the credit card companies. Another thing to consider when working with a credit counseling company is any debt they help you with, on your credit report will show as TPA or third party assistance, which in some cases can be as bad as a bankruptcy on your credit rating.
The fourth option you have is debt consolidation. Debt consolidation requires taking out a loan to pay off several debts. Many times this will give you a smaller interest rate to work with and will also offer the convenience of making one payment rather than several payments to your creditors. However you will be paying on this consolidation loan for a much longer time, than say increasing your payments to your creditors. Consolidation will make it difficult to discharge your debts in bankruptcy. You will want to make this decision after some serious thinking and weighing of your options. Because of the advantage a debt consolidation can offer a debtor who has high interest balances, companies can abuse the situation by charging extremely high fees in the consolidation loan. Also there are some unprincipled companies will purposefully wait until a client has backed themselves into a corner and has no option but to refinance in order to consolidate to pay off the bills which are behind.
Chapter 7 is option number five. Chapter 7 is considered to be the last resort by most because of the damage it causes to the person’s credit rating. For those who owe a lot of money on their credit cards and have little or no income to speak of, this can seem like the only debt relief option open to them. Chapter 7 bankruptcy will require the debtor to liquidate all non exempt assets of value in order to pay the creditors something. Most debtors who file for Chapter 7 bankruptcy will tell you that the long term damage isn’t worth it.
The last option is to Do Nothing. It is an option to do absolutely nothing to pay your creditors. However, just because you choose to do nothing does not mean your creditors will be doing the same. Doing nothing can result in lawsuits, repossession and plenty of stress. You are probably aware that ignoring your debts and creditors will not make them go away, but it will make your life interesting, stressful and in some cases miserable.
Author Resource:-
Ray Subs works with Debt Relief Place as a public relations consultant, more information about Debt Relief Place can be found at http://www.debtreliefplace.com
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