DEBT RELIEF OPTIONS

There are numerous ways that consumers can work to repay their existing unsecured debts, and as a result there are many companies that have thrived catering to the desires of consumers. Places that specialize in home equity loans, pay day loans, car title loans and other lending programs that offer quick access to cash to repay your debts. The problem with many of these notions is that it presents a very short term solution to what is ultimately a long-term problem. Taking out a loan to pay off another loan, doesn’t change the situation it simply changes who you owe money to, and in the case of car title loans or home equity loans consumers end up collateralizing their unsecured debts (taking a debt without property attached to it and folding it into a debt that does have property attached). When an individuals budget demonstrates that they have the capacity to maintain payments it may work out, however if a person has not addressed the root cause of their debt or insolvency it means that they will continue to run the risk of defaulting on the debts, only now it could be on their higher mortgage payment or title loan. In many cases this means that consumers face the very real and very scary potential of defaulting on payments and losing the property they have secured the loan with (their home, or car).  

Our agency offers solutions that work within a client’s budget and payment capabilities without generating new loans. It is a true repayment plan. To be clear however we want you to be aware of many of the more popular debt repayment plans that exist.

Debt Management
Debt Management has proven to be a very successful model for consumers to pay down their existing unsecured debts. A Debt Management Plan will facilitate the repayment of debts to creditors while also obtaining certain benefits for the client. The First benefit is the establishment of one (1) consistent monthly payment. Rather than having several due dates throughout the month – the client will only have one monthly payment. These funds are then distributed to creditors on the client’s behalf. The second and perhaps most important benefit is the reduction of interest rates. Far too many consumers are saddled with credit card interest rates that exceed 20% – 25%. This means that the consumer is stuck in a perpetual cycle of paying. For example a debt load of $10,000 and an interest rate of 25% will mean that each year the consumer will pay close to $2,500 in finance charges (roughly $209 per month). Most creditors require a minimum payment of 2%–2.5% of the client’s total debt. So a person in this situation who is only sending the minimum payment is only paying about $41 per month to resolve their $10,000 debt. This will mean a very long payment timeline. By reducing the interest rates being charged by creditors, Debt Management Program are able to keep your payments relatively close to what they currently are and yet still have a significantly higher amount of money being contributed to the principal balance. With Debt Management consumers are able to accomplish more, and on a quicker timeline; usually under 5yrs. It is a viable option for those individuals who are financially solvent but have not been able to make much headway on their debts.

Debt Settlement
This solution has been growing in popularity over the years and more so, as the state of the US economy has declined. Debt Settlement is an organized structure made available to consumers who are financially insolvent (forced to make decisions on what bills to pay late, or what bills to pay on time. Insolvent consumers often find themselves “Robbing Peter to pay Paul” This very dangerous pattern is called the “borrow and owe.” It puts a stranglehold on a consumer’s ability to reach a state of stability. What settlement does is create a structure where insolvent consumers can begin to save funds until a position is built and a payment can be made to the creditor to once and for all resolve the outstanding balances. Most consumers will see a repayment of only 40% - 70% of what they owe. Until the work is begun on the settlements themselves it is almost impossible to project a firm number. Reputable agencies will provide an estimated range of both repayment amount and timeline. Debt Settlement has seen a significant amount of growth over the years but it is very important to find an agency that focuses on quality customer service. Debt Settlement can take upwards of 36 months in many cases so you must be certain that you are looking for the company that makes you feel comfortable and informed. Be wary of companies that work in very specific terms or claim that there is no downside whatsoever to settlement. As with any process where an individual pay less than what they owe, there are some risks and consequences, however our agency has worked hard to thoroughly disclose all those potential consequences and to take whatever steps we can to limit or eliminate them.

Refinancing / Home Equity Loan
For many individuals refinancing does present a potentially viable option, but it is important that consumers are aware of the risk. Basically, consumers whose homes are worth more than their existing home-loan can borrow against that difference. The bank cuts a check, the mortgage is reset to include the extra money taken out and the individual is able to pay off the unsecured bills. One thing to keep in mind is that due to the recent credit and lending problems in the US it is a little bit harder to obtain these loans, and they often contain closing costs that can run thousands of dollars. With that being said, we do find ourselves recommending that many consumers pursue this path, but only when their budget, credit, and goals are in line with what refinancing can accomplish. It is important to look at all options prior to moving forward, because once you have moved forward with this option it can’t be undone.

Bankruptcy
Bankruptcy is a legitimate option for consumers who are completely overwhelmed with their debts. Where each month a consumer finds that their situation has been getting bleaker. For a very long time bankruptcy existed as a safety net for consumers, however after a generation of being available to consumers banks felt that they were often being taken advantage of and that debts were being discharged when consumers could legitimately afford to make payments. As a result banks pressured the government to enact the Bankruptcy Reform Bill of 2005. This significantly changed the opportunity for consumers. In the past consumers were much more easily able to obtain a discharge of debts (Ch7 Bankruptcy). Now they are more often then not placed into reorganization (Ch13 Bankruptcy). Though the courts determine who qualifies for what form of bankruptcy, the number of consumers able to obtain a Chapter 7 has diminished greatly, and the number of consumers put into reorganization has grown. With the reorganization bankruptcy consumers make monthly payments to a court appointed trustee, these funds are then divided up to their creditors to satisfy their debts. Often the Ch13 Bankruptcy results in just as much financial struggle and can be costly when factoring attorney fees, court costs, and the repayment as a whole. In truth though, some consumers are in need of this service, and should we see this as a necessity when we speak with you, we will point you in that direction.

Do Nothing
Doing nothing has always been the escape hatch for certain consumers. Basically, you “do nothing.” You don’t pay your bills, you don’t respond to collections attempts, and eventually you face the consequences of non-payment. We never recommend this option, though many people do still turn to it. With the “do nothing” strategy you face a great deal of legal and financial consequences including law suits, judgments, liens on property, civil actions, seized property and long term credit implications. It is rare for anyone to use the “do nothing” system and come out unscathed. Banks don’t get to be so profitable by forgetting who owes them money.