5 ways to get out of CREDIT CARD DEBT
Here are the options that are currently available to those who are in a financial hardship. The explanations I am providing to you have been reviewed by and approved by a lawyer licensed to practice in one of the 46 states including Puerto Rico that we represent. It is important to note that there are no simple solutions. Every alternative to repairing credit requires hard work and sacrifice. If anyone tries to tell you that they can easily repair your credit and eliminate your financial difficulties do not believe them. The truth according to the Federal Trade Commission is that those promising services to easily repair your credit cannot deliver. After you pay them thousands of dollars in fees, the Federal Trade Commission reports those parties do nothing to improve your credit report. Most simply vanish with your money. No one can legally remove accurate negative information from a credit report. The law allows you to request an investigation of information in your file that you dispute as inaccurate or incomplete and have your credit report corrected to reflect the true facts.
There are 5 Choices
1. Make minimum payments 2. Obtain a consolidation loan 3.Bankruptcy ( chapter 7 and 13) 4. debt management/credit counselling (legally supervised and without legal supervision) 5. Debt settlement/Forensic Mitigation
The 5 Choices
1. Minimum Payment: You can pay your creditors for the next 20 to 30 years. Making minimum payments does not eliminate debt. The debt continues and depending upon the interest rate could increase over time. Consider this treading water.You are moving but getting nowhere. 2. Obtaining a consolidation Loan.
Consolidation is lumping all your bills into one payment by borrowing money from a lender. Lenders have tightened the debt to income ratios so you may not qualify or if you do, it could be at a high Interest rate. This plan could be as long as a 40 year plan. 3.Bankruptcy The laws have been changed making Bankruptcy difficult and costly. There are 2 different types of available consumer bankruptcys: A. Chapter 7. This is a complete liquidation of all Assets and Liabilities. The court appoints a Trustee who may liquidate or sell som of your possessions to pay your creditors. Most of your debt will be cancelled, but you may choose to pay some creditors, usually to keep a car or home, in which the creditor has a lien. If you have any assets that you want to retain Chapter 7 can create complications. B. Chapter 13 The results are similar to credit counseling and debt management plans which will be explained next. With chapter 13 most of your debts are reorganized inot a single monthly payment. The payment will continue for 36 to 60 months. You may be required to repay all of your debt. The minimum payment may be affecty by property you want to keep. In either case bankruptcy will stay on your credit report for up to 10 years. If you want to consider bankruptcy you should talk to a Bankruptcy Lawyer. 4.Credit Counseling/Debt Management: Debt management plans are administered by both non-profit and for-profit companies.The enrollment in a debt management program means all of your creditors will agree to a specific plan for you to repay them in full. Under this approved plan, each month you will agree to pay a specific amount of money. The money you pay will be divided up among all of your creditors. Interest on the amounts you owe will continue to grow. In most cases it will be at a lower rate than you are currently paying. If you are in a debt management program, even though you will repay your creditors in full you will not be able to use any of the credit cards you enroll. You can only enroll unsecured credit card debt. Debt management plans do not reduce your principal amount and you will continue to have high payments. You will remain obligated for the entire principal. Only the amount of interest and penalties could be reduced. In the end you will pay more than 100% of your debt.Your credit will be affected during the term of the program usually between 3 and 8 years.
Not all creditors offer reduced rates under this program. To make this program work you must be in a position to pay at least 2.5% of the enrolled debt per month. There are also many rules that you must follow, including the number of times you can miss/default on a payment. The failure rate in this program is very high. There has been some controversy regarding some orgaizations that engage in credit counseling and offering debt management plans. In fact the IRS has recently investigagted these services some and even revoked their tax exempt status. One way to level the palying field with credit counseling is to enroll in a legally supervised credit counseling program where a lawyer will review everything. While it adds costs, it also provides additional benefits. One benefit is that no creditor will take any legal action against you asl long as you comply with the requirements of your program. 5. Debt Settlement/Forensic Mitigation This is the process where a third party acts on your behalf to negotiate with each of your creditors, one at a time, to reduce the amount of your debt. The process involves you putting aside a certain amount of money each month. Out of the money you put aside each month, a portion goes to pay your fees and the rest goes into a savings account. Once your savings reach a certain level, a third party begins to negotiate with one of your creditors. Once the third party agrees to a settlement, the savings you have accumulated are used to pay the settlement. Afte the first settlement the process is repeated untill all of your enrolled debts are settled. In order to participate in the process you must have a genuine financial hardship. Otherwise a creditor could claim you are attempting to defraud them and that you never had any intention of repaying them. There are two types of debt settlement, legally supervised debt settlement where a law firm provides and supervises the services and traditional debt settlement where lawyers are not involved. We believe that the use of Lawyers is the superior approach. Debt settlement with lawyers is referred to as forensic mitigation. In debt settlement/forensic mitigation, you have an advocate who is working for you and this person who is not paid by the creditors is someone who is believed to be a neutral party (like a trustee in a bankruptcy). The average debt settlement program/forensic mitigation is estimated to be completed within 3 years.
The total costs including the fees and settlement amounts is going to be substantially less than in the debt management plan. You get to keep your other assets and do not get involved with a bankruptcy trustee.