debt relief options

debt relief options

You’ve accumulated too much credit card debt and something has to give! The monthly payments are more than you can handle and you’re heading for real financial trouble! The good news is that you are not alone. Thousands of people are taking advantage of the many debt relief options available today.

But how do you know what they are and which one is the best for you? Let’s take a look.

One of the more popular debt relief options is Bankruptcy. Many people don’t feel comfortable filing bankruptcy because they would be marked for life or it would be detrimental to their career.

But keep in mind that in 2005, the banks lobbied Congress to make it much more difficult to file Bankruptcy and walk away from your debts. In fact, if you have an income, it may be impossible wipe the slate clean with bankruptcy. If you are considering this option, you will need to consult with a reputable Bankruptcy attorney.

Another option is Consumer Credit Counseling. The credit card companies learned a long time ago that some people can’t even pay their minimum payments. rather than watch them default with no hope to recover their money, they supported forming non-profit Debt Management firms where they send their troubled clients.

There are 2 main downsides with this choice:

Firstly, t tend not to give you a break in the amount you owe, which means you end up paying back 100% of your balance at a much reduced interest rate.

Secondly, participating in a DMP is viewed as a negative item on your credit report that many lenders view much like a bankruptcy when it comes time to offer you new credit.

Another option for your debt relief is called Debt Settlement. It’s one of the more popular options when you want to do the right thing, you don’t want a public record of Bankruptcy and you want the opportunity to pay LESS than you owe.

Debt settlement is an aggressive approach to debt relief where your creditors receive a smaller but equitable share of their money over time due to a demonstrated financial hardship you have experienced.

Debt settlement plans last anywhere from 1-4 years and allow you to set aside a small amount that you can afford into a special purpose savings account that YOU control.

As you build funds in this account, they are used to negotiate settlements with your creditors and ultimately relieve you of your debt.

Because there is no bankruptcy involved and the goal is to settle the account in full for LESS than you owe, this is the best option for rebuilding your credit reputation. It shows you didn’t simply walk away from your debts and your creditors did receive their share.

Our organization specializes in debt settlement AND you do not pay fee until we settle your accounts one creditor at a time.

Are you having trouble paying your credit cards or other unsecured debts?

Are you getting phone calls and letters from your creditors or debt collectors?

Would you like to be FREE from the stress of having too much debt?

Our experienced, caring debt counselors will help you understand and exaine each option and help you decide which option makes the most sense for your situation.

With DRNW, you will enjoy having a personal solution specialist assigned to your case so you can always get your questions answer in a timely manner.

If you are only making the minimum monthly credit card payments, a Debt Management program may be right for you.

Debt Management allows you to consolidate all of your unsecured debt into one low monthly payment and offers the following benefits:

  • Pay less. Better repayment terms are offered by most creditors. Most will lower interest rates, wave late and over the limit fees AND bring your accounts back to current without making up those missed payments. This can save you thousands over the life of the debt!
  • Pay off your debt faster. You’ll be able to pay off your debt in three to five years rather than the average 10-15 years it could take.
  • Reduce your stress. How would it feel to stop the collection calls and know you are on the path to being DEBT FREE?
  • One, easy payment each month. Your credit cards and other unsecured debts are consolidated into one monthly payment so you don’t have to juggle payments.

If you do not qualify for a Debt Management Program, Debt Settlement may be the answer.

Debt Settlement is a program designed for people:

  • Who are starting to become delinquent on their payments
  • Some or all of their debts have gone into collections
  • DO NOT want to file for bankruptcy

Advantages of a Debt Settlement Program:

  • ONE, LOWER monthly payment
  • Settle balances at 50% or less in many cases, saving you thousands of dollars in principal and interest
  • DEBT FREE in 36-48 months
  • Rebuild you credit score

We can help with the following types of debts:

You may find yourself in a financial situation where BANKRUPTCY may be your best option.

You should consult one or two BANKRUPTCY ATTORNEY SPECIALISTS to determine what type of bankruptcy is best for you.

There are several professional debt relief options are available to help you reduce or even get rid of your debt in a consistent and logical manner.

Debt is a way of life for most Americans, some of it good, much of it bad.

Let’s start with a positive spin: Handled responsibly, debt can be the impetus toward great investments in homes and education, serving as a key economic engine. In other words, if you used credit to buy a home and get a college education, you are on the good side of debt.

Then, there is the bad side.

Debt among U.S. consumers is escalating at a dangerous pace, putting younger generations at a financial risk that was never experienced by their parents. It usually starts with irresponsible use of credit cards and grows worse as unforeseen circumstances like unemployment, medical emergencies or unforeseen changes in a family situation come into the picture.

According to a study by the Pew Charitable Trusts, 69% of American consumers view debt as a necessity, but prefer not to have it. Meanwhile, 85% of Americans believe that others use debt to live beyond their means. Despite that apparent disdain, the debt load for Americans keeps rising.

The Federal Reserve says that the average household debt is up to $132,529 (including mortgages) a jump of 11% in the past decade. Credit card debt and auto loans are climbing over the $1 trillion mark. Student-loan debt has hit a staggering $1.3 trillion with 44.7 million borrowers, who owe an average of $37,172. That figure alone is up 186% in the past decade!

The obvious reason that debt keeps rising is simple: Household income is up 28% in the past 13 years, but the cost of living has increased by 30%. In other words, we’re not making enough money to cover the expenses we take on.

Beyond keeping up with daily expenses, irresponsible spending has taken a toll. The path to a credit crisis is paved through restaurant bills, designer clothes and vacations at five-star hotels. Many families, even with a well-meaning financial plan, don’t pay close attention until the hole gets so deep, there is no way out.

They need solutions.

Where to Find Credit Card Relief Programs

Fortunately, there are several methods to reduce debt – and maybe even eliminate it – in a consistent and logical manner. This can be done on your own, if you have discipline, but it’s often beneficial to partner with financial professionals, who can negotiate lower rates with lenders, refinance homes or create budgets that keep you on the right course.

Some of the professional credit card debt relief programs include:

  • Credit Counseling
  • Debt Management Programs
  • Credit Consolidation
  • Debt Settlement
  • Bankruptcy

Here is a look at each of those solutions and how they might provide some debt relief for you.

Programs and Services Often Left to a Professional

While you can handle debt-relief solutions yourself, some options are often left to a professional.

Working with a nonprofit credit counseling agency provides a clear picture of your financial options. They will review your budget, evaluate debt-relief alternatives and suggest solutions.

  • It’s free. Most nonprofit organizations offer credit counseling sessions free, but be sure to check. Some agencies are for-profit and could require fees.
  • It’s professional. Counselors are certified by a national organization. They will teach you the basic skills to reduce debt and manage a workable budget.
  • It’s thorough. Credit counseling firms don’t portray themselves as quick-fix solutions. It will require multiple phone calls to sort out your financial picture and provide you a budget that is workable. They offer thorough solutions to complicated problems.
  • Do some research. Not all agencies deliver what they advertise. Get advice before choosing an agency. Ask family or friends if they’ve used a credit counseling service. Make sure you get an organization that provides certified counselors.
  • Be flexible. The advice you get may not be what you wanted to hear. A good credit counselor evaluates your goals and the resources before suggesting a plan of action.
  • Stick to it. It takes patience and perseverance to succeed. Too many consumers drop out of the program before they eliminate their debt.

This is the solution most often suggested by credit counselors. The goal is to eliminate debt by reducing interest rates and fees, while providing a lower monthly payment. Under the debt management plan, you promise to pay back the full principal over time. Debts from credit cards and other lines of unsecured credit can be efficiently managed.

  • It’s organized. You make one monthly payment on consolidated debts, giving you the ability to handle your finances more efficiently.
  • It’s good for your credit score. By keeping your payments on track, your credit score will improve over time. There is a tangible reward for consistent payments.
  • It’s budgeting 101. Your credit counselor will help you devise an affordable monthly budget that should improve your understanding of money management.
  • The time. This program typically takes 3-5 years to eliminate all debt.
  • The Cost: There is usually an enrollment and maintenance fee.
  • No Go: If you drop out of the program, you lose the concessions made by your creditors so the interest rate on your debt will go up and there could be late fee payments.

This is a program where you take out one loan to pay off all unsecured debts. In the process, you hope to reduce the interest rate paid on your debts and make one manageable monthly payment. In effect, your multiple debts are combined into one.

  • Several avenues available. If you choose a bank or credit union to get a debt consolidation loan, the competition between them could mean a low interest rate. Finding a zero-percent balance transfer credit card is another avenue.
  • They have expertise: Certified debt-consolidation experts can find the lowest monthly payment. They know how to negotiate with lenders.
  • Ease financial fatigue: There is an emotional burden to being in debt. Seeing your interest rates and monthly payments lowered will bring a welcome wave of relief.
  • Are you qualified: Not everyone is eligible for debt consolidation loans, especially if your credit score has suffered while you piled up debt.
  • Watch out for fees: Read the fine print on that zero-percent balance transfer card. There might be a hidden fee or time restriction that negates other advantages.
  • Collateral damage: Beware of secured loans that put your home, car or other assets at risk if you can’t pay back the loan.

In a debt settlement, the lender agrees to accept less than the full balance of a debt in return for a lump-sum payment from the consumer. Debt settlement is generally a consideration for people with very poor credit.

  • You may pay less. The consumer usually ends up paying 60-80% of the original debt, but it could be as little as 50%.
  • Expertise pays off. Though you could try this yourself, debt settlement companies are experts at negotiating with creditors.
  • There are many. This is considered the highest risk choice for many reasons, tops of which might be that many credit companies won’t accept debt settlement offers.
  • It costs how much? Debt settlement companies get paid a percentage of the debt solved or a percentage of the amount saved. When the math is finally done, the fee plus the debt paid often come out to 80-90% of what was originally owed.
  • Credit Score Issues: One thing is certain: your credit score will be damaged. The lender, collector or credit-card company will report the debt as “settled for less than agreed’’ or “settlement accepted’’ for seven years. Also, even though you are dealing with the debt-settlement company for payments, the lenders will report late-payment status updates to the credit bureaus. That could be the case until the account is actually settled.

This is the last-ditch solution if your financial situation has become so overwhelming that there doesn’t appear to be a way out. Bankruptcy offers a “fresh start” though with lots of restrictive conditions. You can file for either a Chapter 7 bankruptcy, which cancels your debts, or a Chapter 13 bankruptcy, which sets up a 3-5 year repayment plan to eliminate your debts.

  • Starting all over. This is a chance to wipe out all your debt and start from scratch. Hitting the reset button on your finances can restore your peace of mind after what probably was years of daily worries about debt.
  • Protection from harassment: When you file for bankruptcy, the court issues an “automatic stay,’’ meaning that creditors will be barred from making collection attempts on your debts through phone calls and letters. Creditors will deal exclusively with your attorney and not you.
  • Non-disruption of life: You shouldn’t lose the important assets you own in a bankruptcy. Things like your home, retirement savings, clothing, cars up to a certain value and other personal items are exempt from creditors.
  • Credit score ruined. Starting over applies to your credit score as well. Bankruptcy stays on your credit report for 7-10 years, meaning lenders will see evidence that you could not pay your bills. This means paying very high interest rates for any type of loan, whether it be a credit card or an attempt to get a mortgage.
  • It’s Expensive: First, you must search for a good bankruptcy attorney (they don’t work for free). There are court filing fees, paralegal fees, bankruptcy trustee fees, photocopying charges and consumer counseling fees. It adds up quickly.
  • Some debts can’t be eliminated: Debts like student loans, alimony, child support and back taxes owed to the government, can’t be eliminated by bankruptcy. You still owe those bills and are responsible for paying them.

Services Consumers Can Handle Themselves

There is a do-it-yourself angle to finding debt-relief options. If you want to save some money and potential aggravation, it’s necessary to educate yourself in the areas where it requires a little quick thinking, a phone call or common sense.

But consumers must be disciplined. They must be willing to keep their own records. And it helps to have an open mind because there are times when adjustments are necessary. This isn’t a game for the feint of heart — or the inflexibly regimented mind.

Where is your money going, anyway? It’s time to get a handle on your daily living expenses, such as groceries, personal items and transportation. Understanding where your money is going is the first step to credit card relief.

  • It’s free: It’s your effort and wherewithal. If you’re trying to eliminate debt, free things will catch your eye. Here’s an obvious one.
  • Budget help: When tracking your finances, budgeting can be a snap. And you’ll be surprised where the money is going. No doubt, you’ll make adjustments , some of them quite easily.
  • Time consuming: Unless you are extremely thorough, it can get tiresome to account for each expense at the time of purchase.
  • Forgetfulness: Will you remember to accurately track each and every purchase? Really? Be honest.

There are plenty of options and tools made for individuals to stay financially responsible. It’s not just for large companies.

  • It’s a snap: Budgeting software can keep a virtual log and deduct purchases from available income. There are even smartphone apps to simplify budgeting.
  • Accuracy: Built-in calculators and automated alerts can track trends in your spending habits. It’s a lot easier than doing it in your head.
  • Software for dummies: Some budgeting software and apps aren’t easily understood. They aren’t useful if you don’t understand the methods. It might require some training.

If your home is underwater — you owe more than the home is actually worth — or if mortgage rates are especially low, this is a great debt-relief option. Do your research, find a trustworthy lender and go from there.

  • It saves money: There are fees, of course, but by doing your own legwork, the cash that you’d pay a professional, stays in your own pocket.
  • Great Education: Refinancing your home will give you a crash course in logistics, real estate and finances.
  • It can drive you crazy: Exhaustive research. Endless phone calls. Aggravation. Are these exercises you generally try to avoid? If so, maybe it’s worth paying a professional.
  • Paperwork Trail: The loan application includes a complete review of your finances and employment history. You must provide recent income tax returns, pay stubs, proof of checking and savings accounts, investment records and more. Again, if this doesn’t sound enjoyable

Renegotiate Your Credit Card Bill

You’d be surprised at the flexibility of some credit-card companies. They will negotiate terms on the interest rate you pay and might discuss a lump-sum payment to clear your debt. They are often motivated by getting SOMETHING, rather than nothing.

People who are having financial troubles due to mounting debt can only recover if they make a firm decision to take action. This decisions should be partnered with determination to ensure that they will complete whatever debt relief option they set out to do.

Achieving financial freedom is not a one way path. There are various options available for the average debtor and each of them has their own pros and cons. When you get the help of a financial expert or a credit counselor, they will tell you of the best option that is not only agreeable to you but also acceptable to your creditor.

While a particular option seems like the best option that will provide you with the best savings, you have to consider that it is your creditor who will be losing money out of any option.

To help you decide, here are the 5 different debt relief options that you can consider to attain the ultimate financial freedom.

Choosing the Best Debt Relief Option

There are 5 primary options for debt relief. You may read about others but all of them will fall under one of these 5. These are developed through the combined efforts of the federal government, lending institutions, non profit organizations, individual debtors and credit card companies. Any of these will lead you to a debt free life but they have various effects on your finances, credit report and history. You need to approach each one with caution and careful analysis.

Before we go through them, you need to consider carefully the need for professional help. One or two of these options will require the help of a debt relief expert. But for those that does not have that need, you may want to get at least a financial adviser. There are several non-profit organizations that are duly endorsed by the federal government. They have a roster of financial experts and credit counselors that you may want to talk to. This is needed to address the root cause of your debt problems, which is poor financial management and bad spending habits.

All these options should begin with a budget plan. This can be done for you by a financial expert or you can do this on your own. It involves taking your income, total debt, monthly minimum payments and basic necessity expenses. The aim for a budget plan is to take away the basic necessity expenses from your income to determine the amount that you can afford to use to pay off your debts. Let us refer to this amount as your debt payment fund.

5 Primary Options for Debt Relief

Now that we have covered that, let us discuss the 5 debt relief options that is available for you.

The first of the 5 debt relief option is the most obvious and less complicated. It involves a disciplined way of paying off your debt on a monthly basis. The goal here is to pay off at least the minimum payment requirement. But to succeed in this, you have to aim for paying more than that amount. Otherwise, it will take you a really long time to finish.

The great thing about this option is you will not be burdened by late payment fees and high interest rates. And if you maintain the habit of paying on time, your credit score will not be hit. Although, it will take you a really long time to finish paying your debts, unless you can pay off more than the minimum.

To be able to increase your ability to pay, you may want to consult your budget plan and see if your debt payment fund is enough to cover your minimum payment requirements. If it is more than that, consider paying off the high interest rate debts with a higher amount than the minimum. However, if the amount is not enough to cover that, look into your expenses and see where you can save further. If it is not working, you can proceed to option number two.

The next option that has become increasingly popular is the debt settlement method. This involves the help of a debt settlement agency or a debt relief company. The idea is they will negotiate on your behalf so the creditor will agree to a lower outstanding amount that you have to pay. This is usually a certain percentage of your original balance. When you have paid that off and you do so diligently, the rest of the debt will be forgiven.

The process will begin with an analysis of your financial capabilities. Once the negotiator has an idea of how much you can afford to pay, you will be asked to deposit payments in an insured financial institution. You will stop paying the creditor while doing this. When the creditor realizes that you have stopped paying and sues you in court, the negotiator will step in with a proposal for a debt settlement.

While you are involved in a debt settlement agreement, expect that your credit report will be affected negatively. But it will soon pick up after you have settled your debts.

The key to succeeding in this the hiring the best negotiator to be your champion. While you can do this yourself, the expertise and negotiating skills of a debt relief expert will go a long way to achieve more than what you can. Besides, if you choose a company that has been working long in this industry, you may benefit from the working relationship that they have with the creditors and collection agencies. It will increase your chances of getting a favorable debt settlement.

A legitimate debt relief company will not represent debtors who only wish to swindle credit companies by pretending they are unable to pay for the whole outstanding balance. So you need to be really unable to pay off the minimum payment – otherwise you may find it hard to get a respected debt settlement company to help you.

Another option for debt relief is debt consolidation. This involves putting all your debts in one loan so you only pay for one. The aim here is to remove the high interest debts and maintaining only one payment every month. The most popular kind of debt consolidation loan is the home equity loan. This means you will be putting your home on the line.

The benefit of this debt relief option is easy management of debts because you only focus on one payment. You should only opt for this if the monthly payments are lower than the total of the first option that was discussed earlier. Otherwise, you will just be fooling yourself with this option. Another consideration is your credit score. This will also have a negative effect on your credit report. But it will soon pick up after you have settled your debts and have diligently paid for them on time.

It is also important to keep yourself in line because again, your home is at stake in case you are unable to pay for your debt. Stick to your budget plan and the payment terms of the new loan that you will take out.

The fourth debt relief option is known as debt management or credit counseling. This involves enrolling in a program that will provide you with debt counseling. It works the same way as a debt settlement but the funds will be handled by the debt management company. They will consolidate your debt and pay off your creditors for you – getting the payments from the account that you will be funding of course. They will also help you lower the interest rate, monthly payments and the outstanding balance by negotiating with your creditors. This will also affect your credit report so do not be surprised if you find your score lower than before.

The difference from the debt settlement company is they will provide you with counseling services too. They will help take out the root of the problem – your bad spending habits.

The last and least desired option by debtors and even financial experts and creditors is bankruptcy. This is when you are declared completely unable to pay your debts. A bankruptcy court is involved here and your assets are in danger of being taken from you by your creditors. Even that is not assurance that your assets will be able to pay your creditors in full.

This option will have a very drastic effect on your credit report, score and history. In the event that you will need financial aid, your chances of getting one is very slim.

Also, it is not a guarantee that you will not pay off your creditors. The bankruptcy judge will rule if you are qualified for a Chapter 7 or Chapter 13. Chapter 7 means you will be forgiven of the whole debt while Chapter 13 involves payment for a percentage of the debt.

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