Your Options

Pay on your own

As much as we all would prefer to handle things on our own, there are times in our lives when we all need some help. When it comes to paying down your credit card debt it can be an overwhelming task that often leads to a dead end for consumers. The interest rate on a credit card balance is usually between 10-30% (APR). These high interest rates can be very costly and make it difficult for people to pay down their debt in a reasonable time. Most consumers can afford only to make their minimum payments so the smallest balance can take over a decade to pay off. It’s no wonder getting out of debt seems so hard.

If you were to fall behind on the accounts it gets even more difficult to get back on track. Your creditors will increase your rates and tack on late and over the limit fees making it impossible for someone facing a hardship to catch up. Unfortunately most people choose to do nothing and hope things will get better. This can be very expensive. Eventually your debts must be handled. Unless you can afford to pay your balance in full every month, you may want to consider other options that are available.

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File Bankruptcy

Chapter 7 - or "liquidation" or "straight bankruptcy” involves the liquidation of most of the debtors unsecured debt. A trustee appointed by the court gathers and sells your nonexempt property. The proceeds from the sale pay your creditors. You're able to keep any "exempt" property.

Chapter 13 – or “personal reorganization bankruptcy” Involves a court appointed trustee to organize a repayment plan that sets forth with specificity the manner in which debtors will settle their debts or pay off in full over three to five years.

Both Chapter 7 and Chapter 13 bankruptcy represent a severe negative impact on your credit for 7-10 years. Even filing for bankruptcy can be costly as a typical filing can cost up to $2,500. Filing for bankruptcy could affect your employment status or ability to get hired.

• May have a negative impact on your employment status or future employment.
• In a Chapter 13 filing, you may end up paying 75 - 100% of your debt back.
• Chapter 7 is much more difficult to qualify for under the new bankruptcy laws.
• May result in higher interest rates on future loans.
• Carries a negative stigma, mental stress, and other burdens.
• Bankruptcy is a 'last resort'.
• Chapter 13 completion rates average only 32%.
  

NOTE: Anyone considering bankruptcy as a debt relief option should contact a Bankruptcy Attorney.

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DEBT MANAGEMENT PROGRAM (DMP)/CONSUMER CREDIT COUNSELING

Debt Management /Consumer Credit Counseling Programs are designed to get you out from under your credit card debt quickly. The program consolidates your bills into one simple payment. Your creditors reduce the interest you are currently paying. This allows your balances to come down much faster each month. Often times a DMP can also lower your monthly payment. This provides extra relief to your monthly budget.

If recently behind on your accounts the program also offers the opportunity to have your accounts re- aged (brought back to a current status). Once re-aged, as long as your payments are made on time your accounts will remain current. Most consumers enrolled in a DMP are debt free within 3-5 years. Plus there are no penalties for paying the accounts off in full. Remember, it’s all about getting them paid down quickly and saving as much money possible.

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Debt Settlement Program

Debt Settlement is the most cost effective and quickest solution for consumers struggling with unsecured debt. It is rapidly becoming the most popular method used to deal high balances, high or unmanageable monthly payments, and past due accounts. A debt settlement company works directly for you as your advocate in dealing with and negotiating your high balances down with the creditors to a fraction of what you owe. Clients are usually complete in approximately 18-36 months depending on the client's ability to save, which is typically a much shorter time frame than with other options.

It is important to know that debt settlement isn't for everyone. In most cases your credit will be negatively impacted as your accounts will be reported as delinquent until the accounts are settled. Creditors are becoming increasingly aggressive in collection efforts, such efforts may include placing the account with a collection agency or attorney, lawsuits and even wage garnishments are not typical but may occur. In most cases if a judgment or wage garnishment has been obtained, payment plans are still able to be worked out with creditors. If your accounts have not already been charged off, you balances will continue to accrue interest and penalties for the first few months until the accounts charge off but should be taken into consideration by the settlement company when calculating your monthly payment.

To determine if a settlement program is right for you based on your situation we recommend you speak with a certified analyst to discuss your options.

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