The Downfall with Declaring Bankruptcy
With an unstable economy, no one is safe from lay-offs or salary cuts. Those who are already living from paycheck to paycheck may find themselves in a horrible situation if their income changes. While bankruptcy may seem like the only option, it’s often the worst path to take.
One of the most important reasons to avoid bankruptcy is the damage to your credit. Bankruptcies stay on your record for ten years making it virtually impossible to purchase a car, home or even find a landlord willing to rent you an apartment during that time frame.
In addition, current bankruptcy laws do not ensure you retain your home, vehicle and personal possessions. With a bankruptcy, you must continue making your home and car payments or risk losing them. You also are often forced to sell some of your personal possessions in an effort to pay off a portion of your debt. With a bankruptcy, you may end up homeless.
Debt relief programs help relieve unsecured loans like credit cards, school loans and medical bills. Qualified debt counseling companies will help work out a program that you can afford and that helps get you out of debt, avoiding bankruptcy.
Video: I declare bankruptcy! (The Office)
Choosing a Debt Counselor
Before selecting a debt counselor, make sure you’ve done your research. There are legitimate debt counselors out there, but also many fraudulent ones. Start with the Better Business Bureau and see if there are complaints against the company you have selected.
It’s also important to check a company’s track record. If their previous clients have remained debt free, you’re generally safe. If they’ve fallen back into their old habits, it’s likely that the debt counselor is lacking.
Also, verify that the debt counselor made timely payments. If you enter into a debt-counseling program and they fail to pay on time, you are still charged the late fees, even if it was not your fault. Debt counselors must have an excellent record of accomplishment with proven results from all of their clients. If they don’t, you’re better off looking for a different counselor.
Video: How to Get Out of Credit Card Debt
Debt Settlement Programs
A debt settlement program occurs when a certified counselor negotiates with your creditors to reduce the amount of money you owe. It is a legal procedure helping to prevent bankruptcy. To qualify for debt settlement, you must be at least three months behind on your bills.
With debt settlement, once you’ve agreed on a discounted amount, you must make that payment in full. The company you hire will take your monthly payments and build up an escrow that is used to pay your creditors when the account has enough money.
Understanding Debt Management
If you can make it work, debt management is an excellent way to pay off debt. A qualified financial counselor arranges new terms with your creditors. This often entails dropping interest rates and late fees providing you make monthly payments as promised until your unsecured debt is paid in full. You pay your debt management company and they pay your creditors.
Debt management programs usually take about three to five years to complete. Once you’re done, you have a fresh financial start and hopefully have picked up better money management skills along the way.
Debt Consolidation Loans
Debt consolidation loans are a good option for those who can afford the monthly loan payment. This is key. If you face another financial set back and fail to pay your debt consolidation loan on time, you may end up in even more financial trouble.
Defaulting on a debt consolidation loan makes it unlikely creditors will be willing to renegotiate terms with you. Worse, if you use a refinance or home equity loan to consolidate your debt, you could lose your home.
Consolidating your debt requires careful thought and planning. Be very certain that you can make the required payment before agreeing to any debt consolidation loan.
If you enroll in a debt relief program, take advantage of workshops and seminars that teach you how to better manage your money. It’s commendable to get out of debt, but only if you manage to avoid the pitfalls that lead to your financial troubles in the first place.
American Consumer Credit Counseling
Auburndale, MA
1-800-769-3571
CareOne Credit
Columbia, MD
1-800-498-1134
Christian Debt Consolidators
Deerfield Beach, FL
1-866-958-DEBT
Consumer Credit Counseling
St. Louis, MO
1-888-656-CCCS
Consumer Debt Solutions, Inc.
Coral Gables, FL
1-866-231-5668
Debt Consolidation Care
Carson City, NV
1-800-601-1579
Debt Relief USA
Hoboken, NJ
1-800-936-6618
Fidelity Debt Solutions
San Diego, CA
1-888-241-2416
Four Peaks Financial Services
Scottsdale, AZ
1-800-727-1478
Freedom Debt Relief
San Mateo, CA
1-800-544-7211
Heritage Debt Relief
Dripping Springs, TX
1-866-852-2273
In Charge
Orlando, FL
1-877-225-9938
Money Management International
Houston, TX
1-866-889-9347
Superior Debt Relief Services
Fort Collins, CO
1-888-366-3414
United Financial Systems
Margate, FL
1-800-510-8765
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