Press Release Summary: When it comes to debt management programs, what most people are looking for does not exist. I cannot tell you how many times I find myself on the phone with a prospective client drowning in credit card debt, looking for the perfect debt management program. The problem is that what most people are looking for does not actually exist...
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The truth about debt management programs
When it comes to debt management programs, what most people are looking for does not exist. I cannot tell you how many times I find myself on the phone with a prospective client drowning in credit card debt, looking for the perfect debt management program. Here is the criteria they are looking for:
- Payoff all your debts in a short period of time - Not affect your credit negatively - Make all your payments on time
The problem: There is no such program!
What I have found over years of assisting clients out of debt, is that most are initially looking for a program that does not, and has not ever existed. Let me be perfectly clear, there is no debt management program in existence, aside from just making all your payments on time, that will provide the above benefits.
Now that we have that understood, let’s talk about what options are available and in short summary, provide a basic understanding of each:
Debt Consolidation Loans Debt consolidation loans are typically home equity loans or second mortgages. This is where you take the equity out of your home to pay off unsecured debts, then just repay the equity loan with one payment, hopefully lower than the total min payments on all your unsecured debts.
The upside is that you can trade in your high-interest unsecured debts for a lower-interest, single payment that can sometimes have a tax benefit.
The downside is that most people who have a lot of unsecured debt will not qualify for a loan, or have any equity in their home.
Consumer Credit Counseling These are the companies that have been getting into a lot of trouble over past years. Typically non-profit, they claim to lower your interest rates and set you up with a low monthly payment to get you out of debt in 5-7 years by splitting your single payment into little chunks to pay each creditor a reduced payment.
The upside is… well there actually is no upside. Because these programs rarely ever do what they claim, and many credit card companies no longer participate in these programs, this has become a serious waste of money and time.
The downside is, in addition to above, that your creditors will each enter a line into your credit reports on every account included that states that the account is handled through credit counseling. This will prevent you from qualifying for pretty much anything.
Debt Settlement In the past couple years, this has become the most popular and most effective program for getting out of debt quickly. However, you must truly be in a financial hardship and not able to pay your current minimum payments. The strategy here is to negotiate with your creditors and get them to accept a settlement pay-off of less than the balance owed. All creditors will accept settlements as long as you have successfully shown hardship. In my experience, attorneys have been most effective in negotiations with creditors because they cannot be bullied by savvy collectors.
The upside is that you can completely settle your debt for pennies on the dollar in a very short period of time; usually 3 years or less.
The downside 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 are already not able to make your min payments, so going delinquent was happening anyway.
Bankruptcy In past years, anyone could file bankruptcy chapter 7 and easily eliminate any amount of debt quickly. Now, since the Bankruptcy Reform Act, most do not qualify for bankruptcy, and you are forced to try other solutions such as debt settlement first. Bankruptcy is a legal court process where those who are completely insolvent are able to possibly protect their primary residence and eliminate debts.
The upside is that once a chapter 7 bankruptcy is completed, the creditors literally write off the debt and cannot pursue you further.
The downside is that it is a permanent court record, and will also remain on your credit reports as a public record for up to 10 years.
I hope you find this information helpful, and that it provides you with a foundation that will allow you to choose the best plan given your circumstances.
Nationwide Debt Solutions is a full service debt relief company which focuses on helping our clients become Debt Free. We are able to successfully negotiate your debts at substantial discounts through a series of negotiations with your creditors and collectors in which we discuss your current situation and ability to pay. Our certified professional debt negotiators have professional training and proven success with numerous creditors and collectors, which ensures successful debt settlement on your behalf.
2022
