You have been searching for information on how to handle some debt. I am responding to that inquiry and have included some general information to help you out.
The first step in any decision making process is simply to educate you on all of your options.
There are several options you can choose from when handling debt. Below is a brief outline of these options. Some may not apply to you however it is very important that you know what all of your options are so you can make an informed decision.
1) Pay the minimum / Keep doing what you are doing: Many people we speak to have never missed a payment but they find themselves with debt that they have had for years. When you make your minimum payments you are a creditors dream come true. There are interest rate calculators available online which demonstrate how much and how long it will take to pay an interest bearing debt.
2) Consumer Credit Counseling / Debt Consolidation Programs: These programs were invented by the credit card companies. In these programs your bills are bundled together and you will have, as they say in the commercials, "one low monthly payment" so once a month you will write a check to this company and they will be responsible for dispersing that money to your creditors. Your interest rates are lowered, not eliminated and so you pay back much more than you initially owed entering the program. The other downsides to these programs are the length- typically 4-7 years. Statistically we see that the longer the program, the lower the success rate. The largest negative aspect is the affect on your credit. Each account you enroll will have a "CCC" placed next to it on your credit report. This stands for "Consumer Credit Counseling" and could remain on your credit report for 5-7 years. This is a third party intervention mark and is applied because you are technically not paying your bills anymore.
3) Bankruptcy: Chapter 7 or Chapter 13. Most cases these days are converted to Chapter 13, by which you will have to make repayments for five years. The upside is that you will be debt free if you can file Chapter 7 but most people cannot. If you file Chapter 13 you will also be debt free but it will take at least 5 years to get there and your credit report still shows a bankruptcy. As you probably know there is a stigma with filing bankruptcy since it is public record. The affect on your credit can last for up to 11 years.
4) Debt Consolidation Loan / Home Equity Line of Credit: You can roll all your debts into one big new loan, possibly into your home loan. If you can get one and afford all the payments, this may be a good solution. The largest negative to this approach is that you are transferring unsecured debt over to secured debt. Should something happen to your ability to earn income or make a payment and you miss some payments on a credit card you may get some phone calls. If you miss payments on a secured debt the creditors have something to take.
5) Debt Settlement Programs: This is the fastest and most cost effective way to handle debts. Typically a company will come in and put you into a program where each month you will accumulate money into a bank account. Once you accumulate a certain amount (typically 40-50%) of a debt amount, the company will settle with your creditor. The upside to this program is that they are the cheaper since you repay roughly half of what you owe. The downsides to these programs are the effects on your credit. The money you are accumulating is typically the money you send to your creditors so your credit score will take an initial hit. The other downside is that many people may be uncomfortable saving money into an account that they have little to no control over, and in almost all cases there is no protection against lawsuits.
6) Financial Hardship Programs: This is a program you apply for and must be accepted into. Because of this, they carry several benefits. Your debts are handled by a law firm who will negotiate down the actual balances of what you owe. The biggest benefit to a client is that their program is overseen by an attorney in your state that you will have access to. Like a standard debt settlement program you are accumulating money each month, however, you are saving this money in your own account so you are in complete control of it at all times. Upon enrollment your creditors are notified that you are working with an attorney and are enrolled in a financial hardship program. Once you have accumulated enough funds in your own account the law firm will finalize a settlement with your creditor. After you approve it, you will send money from your account directly to the creditor. You will have several contacts a month from our service department to keep you informed, updated on progress and to answer any questions you may have. Also, while you work on handling your debts you will be enrolled in a credit correction program to aid in the removal of any "negatives" that are holding your credit score down. What this all means is that will walk away debt free and with good credit.
Hopefully this e-mail gives you some general knowledge on what is out there for you.
Please reply with a number for me to call if you have any questions
or if you would like me to walk you through any particular program.
I look forward to hearing from you.
Gregg R. Wright
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