If you are facing financial hardship and feeling overwhelmed by mounting debt, you are not alone. You are part of a growing epidemic. Statistics show that the average family is in debt to the tune of $8,000, not including secured debt such as car loans and mortgages, with as many as 16 credit cards. In fact, 40% of U.S. families spend more than they earn and 70% are living paycheck to paycheck with nothing left over for emergencies. Many of these families are only able to make the minimum payments each month on their credit cards and paying more than $1,000 a year in interest alone! As they show in the Oprah Debt Diet, if you have $8,000 of debt and basically double your monthly payments, you can be out of debt in around 3 years vs. 30. But this isn’t so doable for people with say $16,000 of debt or more. To pay off $16,000 in 3 years would take payments of over $600 every single month which is next to impossible for people struggling to pay their minimums each month. Using a minimum payment schedule, it would take 17 years, or more, to pay off that much debt. This makes debt a true epidemic. But before you despair or resign yourself to either filing bankruptcy or paying on that debt for the next 30 years, you need to keep reading.
There is a solution - And you CAN, most likely, take advantage of it to avoid bankruptcy and get out of debt in a fraction of the time for even less than the total debt you owe. Sound too good to be true? Normally I would say, “If it sounds too good to be true, it is.” But in this case, it really is true!
Thousands of people have already used this solution and are now debt free, saving money and building wealth instead of drowning in debt. Keep reading to learn what this solution is, how it works, and where you can go to find out if you qualify. But because this site is all about providing consumers with the true facts, there is also information about the other options available so you can make an informed decision.
The solution is: Debt Settlement
What is Debt Settlement? – Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’re now out of debt for less than what you owe.
Using this option, even those seriously in debt, $10,000 or more, are able to get out of debt for significantly less than the amount originally owed and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments.
Background – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 60-70% dropout rate, just wasn’t working for those seriously in debt.
How it Works – Not all debt settlement programs are identical, but in general, this is how they typically work:
- You choose the debts you want to enroll in the program. You pay an initial enrollment fee which covers setting up your account and handling future communications with your creditors. As part of the process, most will direct you to close all of your enrolled credit card accounts.
- Debt Settlement is not a loan. Based on an analysis of your income, expenses, and debt, they will work with you to determine an amount that you can afford to pay into the program each month. This amount is usually less than what you have been paying each month to your creditors.
- Once you have accumulated sufficient funds, the mediator goes to work to negotiate with each of your creditors.
- The settlement amounts vary depending on the creditor and the amounts owed, but typically range from 40 – 70 cents on the dollar.
- The debt settlement company typically earns its money from the fees and a percent of the savings they are able to negotiate for you.
- The time it takes to complete the program (pay your last creditor) varies depending on your debt, the settled amounts and how much you are able to pay in each month, but typically the average time in the program is 1-3 years.
Who should you contact? – There are a number of companies out there that claim to be debt settlement companies and even some consumer credit counseling companies, feeling the pinch of creditors reducing their incentives, are trying to switch over. Some are better than others so I do recommend that you do your homework before you sign up. Be sure to check with your local Better Business Bureau before engaging the services of any company.
There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.
The company is Preferred Financial Solutions, Inc. and the program is Credit Card Relief™.
What Makes Them Unique?
- Great Track Record - Credit Card Relief has years of experience, settling nearly $100,000,000 (one-hundred million) of debt for thousands of clients.
- Operate in 46 states.
- Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.
- Unique Program Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. The debt is then mediated by a nationally known debtor mediation law firm.
- Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.
- Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.
Frequently Asked Questions:
- Why can’t I just negotiate with my creditors myself? – First, individuals have little chance of getting to the right person in the creditor organization to discuss negotiating a decent settlement. Second, creditors have little incentive to work with an individual debtor; you are only one of thousands of people who owe them money. Debt Settlement Companies, with their years of experience, know who to talk to and have established relationships with most creditors. More importantly, they have leverage since they represent hundreds of clients and many times are negotiating large blocks of debt.
- Won’t this hurt my credit? – If you are seriously in debt, you have most likely already hurt your credit by not paying on time or failing to pay the entire minimum payments each month. Even one missed payment can lower your credit score. If you continue to struggle, over time, you may be forced to pursue bankruptcy which will definitely hurt your credit. By getting out of debt sooner rather than later, you can actually start to save money and begin rebuilding your credit. There is no such thing as a “get of debt free card”, but this solution has been like a miracle for thousands of people just like you who thought they could never be debt free.
I recommend you at least get your free, no-obligation debt consultation by clicking here Credit Card Relief and filling out the contact information.
Don’t Delay! Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States with annual earnings around $30 Billion. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S. Getting debt free and starting a financial plan to build wealth instead of debt is one of the best things you can do for yourself and your family.
I Like What I am hearing, But I Want to Know My Other Options
You basically have 4 other options.
- Set Up Your Own Budget/Payment Plan
- Debt Consolidation
- Consumer Credit Counseling/Debt Management
- Bankruptcy
Set Up Your Own Budget/Payment Plan
This could possibly work if you are disciplined, have the knowledge, have the financial resources (aren’t strapped for living expenses), and have the perseverance to stick with it for what may be 17 or more years.
Drawbacks
- As they show in the Oprah Debt Diet, if you have $8,000 of debt and basically double your monthly payments, you can be out of debt in around 3 years vs. 30. But this isn’t so doable for people with say $16,000 of debt or more. To pay off $16,000 in 3 years would take payments of over $600 every single month which is next to impossible for people struggling to pay their minimums each month. Using a minumum payment schedule, it would take 17 years, or more, to pay off that much debt. You can go to http://www.dinkytown.net/ and calculate your own debt situation. They have great, easy to use calculators!
- This just isn’t an option for the majority of people seriously in debt.
Debt Consolidation Loan
With debt consolidation, you take out a loan to pay off your debts or a portion of your debts. To secure that loan, you must put up some asset you own. For most people, it is the equity they have in their home. Your balances are then paid off and now you make one monthly payment to the lender. The interest rate on the loan is dependent on the time period for which you borrow the money, your credit score, the equity you have available, and the prevailing rates, but it is typically less than the average credit card rate. So where’s the problem?
Drawbacks
- You are trading unsecured debt for secured debt; borrowing against the equity you have in a major asset, most likely, your home! Sure those credit card balances or medical bills are paid off, but now, if you default on your consolidation loan, the lender can foreclose and you could lose your home. Putting your home at risk is not a good tradeoff, especially for those seriously in debt and already struggling to make monthly payments.
- With loans typically spread over 15 – 30 years, if you do have to sell your home for any reason, you could actually owe more between your mortgage balance and home equity loan than what you make on the sale of your home. In the current real estate market with dropping home prices, this is a real threat!
- Debt Consolidation Loans are typically equity loans which have an adjustable rate. As the interest rates rise, the loan rate rises and with it your monthly loan payment.
- Some people, seeing zero balance credit cards for the first time, suddenly think they have a whole new line of spending power. They somehow forget that they are still paying on that credit card debt! They start charging again and are suddenly faced with both the consolidation loan and maxed out cards to repay.
Consumer Credit Counseling
Consumer Credit Counseling (CCC) agencies seem to be the fair-haired child of the credit card industry and even the new bankruptcy laws. Why? Because they actually work for the creditors, not the consumer! CCC agencies basically act as debt collectors for the creditors. Back in the 80’s, credit card companies were faced with an increasing number of card holders defaulting on their debt. CCC agencies were actually established by Visa as a way to help them collect on delinquent payments and discourage card holders from filing bankruptcy (the primary option at the time for those seriously in debt). While operated as separate entities, these agencies were actually funded by the credit card industry. They made their money, and still do, by charging the consumer a monthly service fee and receiving a percentage of the debt they collected, typically around 12-15 %. (Today that percent has been reduced to around 8% since the new bankruptcy laws have made it harder for people to file.)
These agencies were so profitable that many similar companies started popping up and today there are literally thousands of such agencies selling their services under a variety of names, a large percentage of which claim to be nonprofit or not-for-profit. Some go by names that can easily be confused with debt consolidation or debt negotiation companies.
Drawbacks – Consumer Credit Counseling is not the best option for many and not all agencies are truly reputable or able to do what they claim. The top three complaints sited by those who have tried CCC are:
- High monthly payments and fees: At no point do they negotiate a reduction in the actual debt. You still owe the entire debt to the creditors, plus interest, but in some cases, creditors will reduce the interest rate and/or lower the monthly payments. In order to get you out of debt, your monthly payment will typically be higher than the minimum payment you were already making and in addition, you are paying a monthly fee to the CCC to handle your account.
- Lack of headway made on account balances: Because of the length of time required to repay debts under consumer credit counseling, the credit card balances of those enrolled do not change significantly as time goes by and consumers feel duped once again! This has led to a dropout rate of around 60-70%.
- Payments not being made on time and late fees accruing: Not all agencies claiming to be CCC’s are good companies. Don’t be fooled by that not-for-profit label. It has been reported in the news that the executives of many of these not-for-profit CCC’s are becoming millionaires on people like you just trying to get out of debt. There have been reports of companies “holding” client payments for as long as possible to earn interest for themselves on the money.
- Despite their efforts to convince you of the contrary, Consumer Credit Counseling programs do affect your credit report, so don't be mislead. When you are accepted into a CCC program your creditors will close your accounts and report this to the credit bureaus.
Why not file Bankruptcy?
If you thought your best option was to just file bankruptcy and start over…think again! On October 7, 2005 the new bankruptcy laws went into effect making it substantially more difficult for individuals to file bankruptcy as a means of escaping their mounting debt. Financial institutions have spent millions to “educate” and lobby lawmakers through Political Action Committees (PACs) to get these laws passed to protect their ability to collect and keep consumers in debt. Under the new laws, before you can file bankruptcy, you must first complete financial counseling. You will have to attend classes and provide detailed records of your income, expenses, and tax records. (Remember, under a “consumer credit counseling” program, you will still be required to pay back the entire debt.) Only if the counseling agency determines that you are financially unable to complete a payment plan will you be able to proceed with filing bankruptcy.
How it Works - To proceed with bankruptcy, you will need a bankruptcy attorney to help you determine which type of bankruptcy you qualify for, Chapter 7 or Chapter 13, and to prepare for and handle the court filing. Under the new laws, if your income is too high, you won’t be able to qualify for Chapter 7 and will have to file Chapter 13.
Chapter 7 discharges (wipes out) your debt. Chapter 7 qualifiers usually have little to no assets. Under Chapter 7, your assets (less those exempt by your state) are sold to pay your creditors as much of the debt you owe as your assets will cover. The remaining “eligible” debt is discharged. However, there is some debt that is not dischargeable and you will still be required to pay in full, such as taxes, spousal and child support, student loans, and certain luxury purchases. Under the new law, items deemed as “luxury” of $500 or more purchased within ninety days of the bankruptcy filing (or $750 within seventy days) are not dischargeable.
Chapter 13 is a debt payment plan. You will agree to pay most or all of your debts over a period of time, three to five years. The courts will assign a trustee who will review your finances and determine how much you will pay each month. Again, your Credit Report will show a bankruptcy.
Drawback to Bankruptcy: For many, bankruptcy is the only option, but it isn’t a “get out of debt free” card. It might be a way to stop those harassing phone calls but it is a painful process in and of itself and the wound doesn’t heal quickly. A bankruptcy stays on your credit report for ten years and will stay on your court records for 20 years, and long after, many applications, including those for jobs, loans, or certain types of insurance ask you if you have ever filed for bankruptcy. This should really be your last resort.
