Do You Need Help Paying
Your Debt?
It is easy for people to find themselves in trouble with credit card debt. Sometimes people get carried away spending on frivolous items that they do not need. Other times in the case of job loss a person may think credit cars are all that stands between them and the street.
Excessive spending on credit will catch up and then the debt requires attention. There are options available to help relieve debt issues. Consider the positive and negative aspects of the options available before taking action. Choose the one that best suits your needs with the least negative impact.
Do It Yourself
It is difficult to get out from under massive debt without assistance. It takes a disciplined person to erase debt. The majority of the people that end up with huge debts are usually not disciplined, or most likely they would not be in financial trouble to begin with.
Consolidation credit cards are one option leaving only one monthly payment to deal with. Settle the debt as quickly as possible by paying as much as possible instead of the minimum payment. If they do it yourself is the chosen path, a credit card debt consolidation loan may be possible.
Most financers require decent credit or that the consumer has enough home equity to cover the loan. An individual can do most things that a hired company can do, but may not be as successful. Professional companies have experience in debt negotiations giving them as advantage versus doing it yourself.
Debt Management Company
Hiring a debt management company to help get out of debt is an option. People pay a fee to the debt management company and the company manages their debt. The debt management company negotiates with creditors on behalf of the consumer. The main objective is to negotiate lower interest rates so the debt is possible to pay off quicker.
There are different plans a management company offers including credit card consolidation.
Debt Settlement
This option is the last one recommended for severe cases of credit card debt to avoid bankruptcy. The debtor pays the debt settlement company a fee for their services. Debtors are instructed to stop making their payments is send the decide amount of money to them.
They deduct their fee and set the rest of the money aside. Debt settlement is a lump sum payment so cash has to build up in order to pay a negotiated settlement. In the meantime, creditors receive no payments. They add penalties to the debt, which all goes on a credit report.
Settlement companies typically do not try to negotiate until the debt is at least several months past due. Debt settlement has no guarantee since it is up to the creditor whether to settle the debt.
Bankruptcy
For those that have no other way out of massive debt bankruptcy is the last resort. There are two options available and both require approval from the court. Bankruptcy is not a financial action to take lightly.
They both leave long lasting adverse transactions on a credit report and can have a negative impact when looking for a job, finding a house, obtaining new credit, getting good insurance premiums among other negative results.
1. Chapter 7
Chapter 7 discharges most of the outstanding debt except those owed to the government and child support. It wipes the slate clean, but stays on a credit report for up to ten years. During that time, credit is hard to come by and other financial and personal transaction suffers.
2. Chapter 13
Chapter 13 is a way to reorganize debt. Chapter 13 requires a budget for paying off debt, which remains in effect for up to five years depending on the term limit. During this time, the individual must pay as much as possible to their creditors. At the end of the contract, the creditor writes off any remaining balance.