Credit Repair People

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 from under the burden of debt, is that most are initially seeking a program that does not exist. Let’s be clear, there is no debt management program in existence that will provide the above benefits. That being said, let’s talk about what options are available and in short summary; provide a basic understanding of each one.

Debt Consolidation: Debt consolidation is, in nearly all cases, a home equity loan or second mortgage. This is the process of taking equity out of your home to pay off your other accounts. The good thing is that you can get rid of unsecured debts for a lower-interest, single payment that can sometimes have a tax benefit. The bad thing is that most people in a bad debt situation do not qualify for a home equity loan.

Credit Counseling: Credit counseling companies have been getting a lot of trouble lately with consumer protection agencies. Most of them are non-profit and claim to lower your interest rates and provide a low monthly payment. Typically, they take your payment and distribute to pay each creditor a small payment. The good thing is well there is no good thing. Credit counseling programs hardly ever do what they claim, and many creditors no longer participate. Most have found this to be a serious waste of money and time. The bad thing is that your creditors will enter a statement onto your credit report for every account in credit couseling that states that the account is handled through a program. This is a seroius negative for anyone looking at your credit.

Debt Settlement: This has become, by far, the most popular and most effective program for getting out of debt in a short period of time. However, you must truly be in a financial hardship and not able to pay your current minimum payments. The idea here is to negotiate an accepted settlement of less than what is owed with each of your creditors. All creditors will accept settlements as long as you are far delinquent, and have shown valid reason. It seems that attorneys have been most effective in negotiations with creditors due to the fact they cannot be easily bullied by debt collectors. The positive is that you can completely pay off your accounts for a fraction of what is owed in a very short time-frame; usually 36 months or less. The negative is that your accounts must become very delinquent before creditors will accept settlements. This is not a problem if you are in a financial hardship; after all, you already have an inability to make your minimum payments.

Bankruptcy: It used to be that anyone could file chapter 7 bankruptcy and easily eliminate any amount of debt quickly. Since the Bankruptcy Reform Act, most people no longer qualify for bankruptcy, and have no other alternative but to try other options like debt settlement first. Bankruptcy is a legal court proceding where those who are completely insolvent are able to usually protect their primary residence and eliminate their debts owed. The positive is that once a chapter 7 bankruptcy is fully discharged, your creditors literally write off the debt and will not and cannot pursue you further. The negative is that it is a permanent and public court record, and can also remain as a public record on your credit report for up to 10 years.

This information should provide you with foundation of knowledge that will allow you to select the best debt relief option for your specific financial circumstances.

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Tags: Credit Repair