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					            Debt Settlement VS. other Debt-Relief options               Page 1
    ( Debt Settlement Vs. Debt Management, Debt Consolidation, and Bankruptcy)

Are you currently faced with what seems like the never-ending burden of overwhelming
debt, and many have discovered that you can no longer afford their monthly financial
obligations. If this sums up your situation there's hardly a doubt that you're in the process
of determining the best path in order to eventually live a debt-free lifestyle, or at the very
least be able to easily afford your monthly bills.

Perhaps this search has led you to information regarding Consumer Credit Counseling
and Debt Settlement, but you're not entirely sure which choice is best for you. Let's
review these two debt relief options so that you can compare the pros and cons of each,
and subsequently conclude which - if either - will best assist you in becoming free from
debt.

Debt Management-Consumer Credit Counseling
After signing up for this type of debt relief through a consumer credit counseling agency,
representatives will contact your various creditors in an attempt to get your interest rates
reduced. In most instances consumer credit counseling agencies do successfully get your
rates reduced, but oftentimes the rate of reduction is not significant; it is, however a
reduction nonetheless.

You will begin making just one payment, which will be directed to the consumer credit
counseling service that you hire, and they will subsequently distribute your monthly
payments to your creditors. Your new monthly payment is typically lower than what you
were paying when you were making regular payments to each individual creditor.

Normally people are enrolled in this type of service for at least five years before their
debt is paid off in full. Of course, you'll realize no savings, as you are still responsible for
paying off your total balance to each of your creditors; but you will at least have a re-
payment plan with some amount of reduced interest.

Prior to signing up with a consumer credit counseling service be sure to be diligent in
your research; many of these agencies claim to be "non-profit" when they are in fact
funded by your creditors. This leads one to believe that the loyalty of these service
agencies lies with your creditors and your best interests are not really looked after. Again,
diligently research any agency you may be considering.

When working with a debt counseling company, you are literally charged to just have
someone else analyze your financial situation and create a plan for you to quickly and
safely attempt to escape your debt situation.

Credit counselors are known to usually charge hefty fees to talk to your creditors and
attempt to negotiate lower interest rates and monthly payments. Many times these
negotiations don’t actually even lower your rates by any type of significant amount, and
         Debt Settlement VS. other Debt-Relief options                 Page 2
     (Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

can require you to pay even more when you take the credit counselor’s fees into
consideration. Lowering your interest rates and monthly payments, may allow you to pay
more towards your bill every month, but it won’t reduce the amount of total debt you
actually owe.

Debt Settlement
Debt settlement differs from consumer credit counseling, in that it is intended to
eliminate your debt much quicker, and also significantly reduce your overall debt amount
generally by approximately 50%. Typically consumers choose debt settlement when they
simply can no longer keep up with their monthly payments, and have decided to attempt
to pay their creditors at least something, as opposed to filing for bankruptcy.

Normally credit card accounts must be classified as delinquent prior to creditors willingly
entering into negotiations to reduce your payoff amount. Because of this, if your credit is
fairly decent you'll likely notice a decrease in your credit score as a result of this
delinquency since debt settlement will affect your credit rating, but once you have had an
individual delinquent account completely settled and eliminating this accounts actual debt
amount, your credit score will begin to increase after the settling of each account with
you as the client actually re-building your credit worthiness and score as your total debt
amount owed decreases.

When an account is sufficiently delinquent you (or the professional debt settlement firm
you hire) will then begin negotiating with your creditor to settle your account - typically
an average of 50% of the current balance. If sufficient funds don't exist for the agreed-
upon settlement amount most creditors will agree to break the settlement payment up and
allow you to make anywhere from two to six monthly installments.

As is the case with consumer credit counseling services, it is imperative that you are
diligent in conducting sufficient research prior to hiring a professional debt settlement
firm. For information on factors that should be considered when determining which firm
you will ultimately choose, investigate by checking their references and verify that their
company is fully licensed in the state that you are residing in.

Hopefully this piece has provided you with useful information regarding the process of
debt elimination through consumer credit counseling and debt settlement. I sincerely wish
you the best and hope that you will soon be on your way to finally eliminating your debt
for good.

Gary S. Lieberman is a consultant in the credit services industry. Over the past several
years he has assisted many individuals in resolving their debt-related matters. For more
information regarding credit and debt visit http://www.debtsrescued.com.
           Debt Settlement VS. other Debt-Relief options              Page 3
    (Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

On a debt settlement professionally negotiated payment plan proposal, we generally will
average settlement proposals in which our client will only pay back only 40% - 60% of
the current amount of unsecured debt owed at time of clients settlement, and on a lump-
sum settlement proposal, discounted settlement proposals would generally leave our
client to only pay back 25% - 40% of the current amount of unsecured debt owed at the
time of clients settlement.. Your ultimate settlement process can take anywhere from a
few months to a few years depending on which type of settlement you chose to attack
your negative debt situation ( a payment plan settlement or a lump-sum settlement).

A payment plan settlement will generally take longer and your settlement proposals will
average 40%-60%, and a lump-sum settlement will generally take just a few months with
settlement proposals averaging between 60%-75% and in most cases leaving you only up
to 60-90 days to pay off this lump-sum negotiated settlement proposal.

Most creditors will not even attempt to start to negotiate a settlement proposal until your
account status has been delinquent and aged for a minimum of 90 days with most
settlement results accepted once account reaches between 90-180 days. Most creditors
will charge-off your account once it has reached 180 days and a charge off affects your
credit score in a very negative manner with charge-off reporting up to seven years. For
this reason, it is very important for your account to be settled prior to it reaching charge-
off – reporting status.

Remember, in debt settlement we work for you and not the creditor. In Consumer Credit
Counseling also referred to as debt management, which these programs mostly being
non-profit status, work directly for the creditor and ultimately are paid for their
services by a donation paid by their creditor (your creditors best interest is adhered to by
this hired on Consumer Credit Counseling agency/ Debt Management company.

How to compare Debt Settlement vs. Debt Consolidation

Debt plaques millions of Americans. Just as damaging is choosing the wrong method to
manage debt you can’t even pay on your own. Use these steps to determine whether you
should settle or consolidate your debt.

Steps for determining if Debt Consolidation is your best option
   (1) Determine how much unsecured debt you have. Request a copy of your credit
       report from one of the three major main credit reporting agencies, Equifax,
       Experian and Trans-Union, by going to website www.annualcreditreport.com .
       You could also access it online via an online credit monitoring company like
       Experian, or myFICO.
        Debt Settlement VS. other Debt-Relief options               Page 4
(Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

(2) Do you qualify for a debt consolidation loan ? Contact a few different debt
    consolidation agencies. Review their qualification requirements. In most cases,
    you need to own your own home to qualify for a debt consolidation loan. Debt
    Consolidation is a home equity loan and thus makes your mortgage larger. Other
    qualifications may include a minimum FICO score, steady employment, and a
    minimum monthly income.

(3) Find out how much you will have to save with a debt consolidation loan rather
    than paying your credit cards minimum payments. Ask the debt consolidation
    loan company to give you a quote and check the figure.

(4) Determine if you can afford to make a larger mortgage payment. To figure this
    out, subtract from your monthly income, any food, transportation, and insurance
    costs. If you don’t have enough money to cover a larger mortgage payment, then
    debt consolidation is not right for you. If you do, please go to the next step.

(5) Determine if the benefits of debt consolidation outweigh its complications. Debt
    consolidation can lower monthly payments and reduce interest rates for your
    unsecured debt. Plus, you only have to now make just one payment, and you can
    write off the interest. However, with debt consolidation, it will take you longer to
    pay your bills. Before you’re done, you may be tempted to use your credit card(s)
    again. Plus, you will spend more in interest over the life of the loan. You could
    also lose your home if you can’t make your payments.

Steps to determine if Debt Settlement is the best option for you

(1) Determine how much unsecured debt you have. Request a copy of your credit
    report from one of the three main credit reporting agencies, Equifax, Experian
    and Trans-Union by going to website www.annualcreditreport.com . you could
    also access it online via an online credit monitoring company like Experian or
    myFICO.

(2) Do you qualify for Debt Settlement ? Generally, companies offering debt
    Settlement only work with people who owe more than $ 7,500. There may be
    other requirements as well. Please read through the information provided by the
    debt settlement company. Make sure you meet all of the requirements.

(3) Determine if you have the money for debt settlement. Subtract from your
    monthly income your normal living expenses, including housing, transportation,
    utilities, food and insurance. If you have money left over, then debt settlement
    may be right for you. If you don’t, you should not try debt settlement option.

(4) Search for a debt settlement company. Don’t sign up with the very first company
         Debt Settlement VS. other Debt-Relief options              Page 5
   (Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

   you find. Instead, read through what services they provide and what they expect
   from you. Look for companies that have been referred and our fully licensed.

(5) Decide whether debt settlement is actually right for you. With debt settlement,
    you can reduce the total amount you owe and improve the relationship between
    you and your creditors. Also, you can pay your debt quicker as long as you
    remain faithful to the negotiated settlement proposal offer retained by your
    contracted debt settlement company.

   Debt settlement can also incur potential tax problems. In most cases, your first
   $ 600 of excused debt per each delinquent account is written off and the client
   will be held liable to pay taxes on any amount exceeding the first $ 600. These
   taxes due will be payable the following year when filing your taxes you will
   submit a form 1099 supplied by each of your initial creditors from all of your
   enrolled accounts.

   Debt settlement could affect your credit rating and your creditors may be
   encouraged to initiate lawsuits against you if your delinquent accounts continue to
   be ignored. Also, it could increase the frequency of calls to you by your creditors.
   Once signing on with a licensed debt settlement company, your retained company
   will immediately send all of your creditors enrolled within debt settlement
   program a cease and desist order demanding all future contact with you as the
   client to be stopped, and all contact to be initiated with debt settlement only so we
   ultimately will get your creditors to stop harassing you as the client.

   Steps for comparing Debt Consolidation and Debt Settlement
(1) Compare the short-term benefits of each debt solution option
(2) Compare the long-term benefits of each debt solution option
(3) Determine which option is actually best for you. Which program do you qualify
    for ? Which one offers the best overall benefits ? Which one can you afford ?

    How to compare Debt Settlement VS Bankruptcy

    Debt is a part of life, but too much debt can make life very difficult to attempt to
    enjoy. Two potential solutions to resolving this problem and starting your
    financial life anew include filing bankruptcy or using a debt settlement company.
    Before you actually commit to either option, it’s important to know the pros and
    cons of using a debt settlement company versus filing for bankruptcy to help
    alleviate your financial woes.
      Debt Settlement VS. other Debt-Relief options               Page 6
(Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)
    Determine the extent of your debt situation
   (1) Request a copy of your credit report from one of the three main credit
       reporting agencies, Equifax, Experian or Trans-Union.
   (2) Review your credit report and check for inaccuracies such as incorrect
       personal information, accounts that do not belong to you and even
       accounts listed with balances that are actually paid in full. It’s also
       important to know your FICO score which is a credit score system. The
       acronym “FICO” is derived from the name of the software used to
       calculate the score. While FICO scores range from 300-850, the average
       score is somewhere in the high 500’s with a score of 500-620 being
       considered poor credit, score of 620-680 being considered good credit,
       and a score of 680-850 being considered to be excellent credit.
   (3) Determine how much debt you have by adding up the balances of all of
       your credit accounts. Loans, both secured and unsecured, and even
       collection accounts.
   (4) Use this information when making your decisions about filing for
       bankruptcy or employing a debt settlement agency to help alleviate your
       financial problems.

   Examine your monthly finances
(1) On a sheet of paper, list all of your monthly income including paychecks,
    alimony, spousal support, child support, bank, investment and rental interests
    or income. If you work overtime or receive bonuses, include the information
    too. If you opt for filing bankruptcy, you will need to include your average
    monthly income from the six months prior to filing in your bankruptcy
    petition, so it’s important to get these numbers no matter which solution you
    opt for, bankruptcy or credit counseling.

(2) On another sheet of paper, list all of your mandatory monthly living
    expenses, such as housing, transportation, insurance, prescriptions and doctor
    visits, utilities, groceries and education-related costs. Don’t include payments
    for credit card debts, entertainment, or other items that are not necessarily for
    your day-to-day survival. Definitely do not list an expense twice. That means
    if you used your credit cards to buy prescriptions, include that cost in your
    mandatory expenses list. However, if you used your credit card to buy a shirt,
    do not list the purchase on your mandatory expenses list at all, unless it was
    necessary for say, work.

(3) Subtract the total of your monthly living expenses from your total monthly
    income. A balance indicates you have expendable income you could
    potentially use to pay down your debts. A zero or negative balance indicates
    Debt Settlement VS. other Debt-Relief options                 Page 7
(Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

    you do not have expendable income that could be used to pay down your
   debt.

(4) These calculations are important for helping you formulate your decisions
    about filing for bankruptcy or seeking the aid of a debt settlement agency.

   Determining if Debt Settlement is right for you
(1) Determine if you could pay down your debts with your current income. If
    your income does not exceed your housing payments, utilities, gas, groceries,
    and basic financial needs for the month, debt settlement is not a viable
    solution for you. However, if your monthly income exceeds your basic living
    expenses, debt settlement may help you resolve your financial crisis.

(2) Determine if your debt situation qualifies for debt settlement services. Try
    examining the total amount of unsecured debt you owe to qualify, you will
    usually need to owe at least a minimum amount of $ 7,500 in unsecured debt.
    However, the qualifying balance will vary by debt settlement company. Make
    sure you ask each debt settlement company about their unsecured debt balance
    requirements to determine which debt settlement company is right for your
    own particular financial situation.

(3) Look for reputable debt settlement companies. Companies that charge huge
    fees up-front are companies to be avoided. Opt for debt settlement companies
    that are fully licensed or some other reputable pro-consumer group. Make sure
    to check their references, and their service fees are reasonable for the services
    rendered.

(4) Compare the services each company offers. Look for companies with a sound
    history of effectively negotiating with creditors. Ask for their case studies
    you can examine that prove the company’s track record. If company
    representatives are hesitant to provide you with the type of information you
    request, walk, don’t run, out the door.

(5) Examine all of the pros and cons of committing to a debt settlement program.
    Ask the debt settlement company if by hiring them to represent you to
    negotiate your debts with your various creditors, how your life might be
    impacted. Will all those harassing creditor calls stop ? (possible but no
    guarantees ). Creditors can still contact you for the collection of debts they
    are owed unless or until you file bankruptcy). Also, inquire how a debt
    settlement program will impact your credit in the future and what the long-
    term effects to your credit might be.
   Debt Settlement VS. other Debt-Relief options               Page 8
Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

(6) Make sure you are prepared for the drawbacks of debt settlement programs
    such as the potential for increased creditor calls, possible collection law suits
    initiated by creditors, damaged credit and tax problems. If you don’t think you
    can handle these possibilities, then you should probably look for another debt
    solution. When comparing your savings verses these above mentioned
    possible drawbacks, the savings you benefit by actually outweigh the
    potential drawbacks.

   Determining if Bankruptcy is right for you

(1) Determine if you have any other options for resolving your financial crisis
   short of filing bankruptcy, look online for other solutions to your debt
   problems such as debt settlement, debt management and non-profit assistance.
   In addition, attorneys who practice bankruptcy law have begun to offer debt
   settlement services to clients who might have filed bankruptcy before the
   bankruptcy code was overhauled in October 2005, and find the new laws too
   onerous.

(2) Determine if you qualify for bankruptcy by reading the most current version
   of the U.S. bankruptcy code, found in the title II of the U.S. code, However,
   the revamped bankruptcy code is extremely complex to understand, so don’t
   be surprised if you aren’t able to comprehend much of what you are actually
   reading. The bankruptcy code can be found online. Many books attempting to
   explain the code in plain English have been written. So check out your local
    library or bookstore for some helpful titles. Even if you discuss your financial
   problems with an attorney who specializes in bankruptcies, you might still
   want to read up on the law yourself.

(3) Determine which bankruptcy chapter you qualify for by reading the
   descriptions of each type of bankruptcy, as well as by reading the rules and
    regulations associated with each. This information can be found at your local
    library, bookstore, online, or by talking with an attorney who strictly handles
    bankruptcies in their every day to day practice.

(4) Court costs for filing bankruptcy are different depending on which chapter
   you file. Currently, a chapter 7 bankruptcy costs $ 299 in filing fees while a
   chapter 13 costs $ 274, although Congress can change those fees at anytime. It
   will also be important to learn how much an attorney will charge you to
   represent you in a bankruptcy. If you meet with a bankruptcy attorney, they
   will likely give you a written fee quote for their services either at your first
   meeting or perhaps in the mail. Do not expect to be able to e-mail a
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(Debt settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

   bankruptcy attorney for a price quote on what they would charge for their
   services. Bankruptcy is an extremely complex area of law and an attorney
   well familiar with the laws completely wouldn’t likely give you a fee quote
   over the telephone or in an e-mail without knowing your entire financial
   picture. Would you call a doctor to ask how much it would cost to set your
   broken arm ? Do you think the doctor would even come to the telephone, and
   secondly, do you think they should or would give you an answer ? They don’t
   know how broken your arm is by talking to you on the telephone and a
   bankruptcy attorney doesn’t know how bad your financial situation is until
   they meet with you to discuss it.

(5) Another important consideration is deciding whether filing for bankruptcy
   will resolve your credit situation. Depending on the types and amounts of
   debts, a bankruptcy filing won’t necessarily rid you of your duty to pay some
   of your bills even though you filed for bankruptcy. With the new bankruptcy
   laws revamped in October 2005, the courts will still hold you liable for your
   debts and you will be required to pay them back based on your income and up
   to a five year period of time to do so. Keep in mind that a bankruptcy filing
   remains on your credit record for ten years but a debt is only supposed to stay
   on a credit report for seven years.

Debt Management company watch outs
Choosing a debt management solution isn’t a decision than can or should be made
with ease. There are companies that promise they can relieve your debts if you
send them money, but just how trustworthy are these companies ? How do you
know that the company you choose can follow through on its promise ? When you
are choosing a debt management company, there are several key things to watch
out for:

Several unresolved complaints with the Better Business Bureau

Any debt management company that you are considering should be checked out
with the Better Business Bureau (BBB), your state Attorney General, and local
consumer protection agency. You can expect to see some complaints, but the
majority of them should be reported as complaints resolved.

Advise or instructions to stop paying your creditors
Many debt settlement and debt negotiation companies tell you to stop paying your
creditors. In the meantime, your accounts go 30-, 60-, 90-, and even 120- days
late. Each month you miss a payment, your creditors report it to the three major
     Debt Settlement VS. other Debt-Relief options              Page 10
(Debt Settlement vs. Debt Management, Debt Consolidation and Bankruptcy)

credit reporting agencies. As a result, your credit scores suffer. On a debt
management program, don’t stop paying your credit card bills unless the debt
management company starts sending in your payments immediately.

Non-profit agencies that charge high fees
You’ll come across many debt management companies that claim to operate
under the non-profit status and it’s possible that they do. However, some
companies use this as a way of convincing you that their fees are legitimate.
There are companies that will assist you for a reasonable low fee. No-profit
Companies charge the client a monthly maintenance fee for their services but
they get paid a donated amount from your creditor for their services, which by all
means is a very excessive amount of money. Non-profit companies work for the
creditors and not the clients. These companies only look to be able to collect as
much as possible from all clients.

Vague details about how your payments will be used

If you’re sending money to a debt management company every month, then you
need to know what the money will be used for. If the company won’t give you
this information, take your money and your business elsewhere.

The absence of a contract or written agreement

Don’t make a commitment with any debt management company based solely on a
telephone conversation. Request a written copy of the terms and conditions of the
service before you agree and especially before you make any payments. If you
don’t agree with the terms, try negotiating. If you can’t get reasonable terms in
your favor, move on.

Promises to remove negative history from your credit report
No debt management company has the authority or the ability to change
information on your credit report. Guarantees and promises to do this are
completely false. All and any debt management companies can do is attempt to
negotiate with your creditors to have your interest rates lowered and attempt to
have your negative information removed. This you can most certainly do yourself.

				
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