Avoid the Pitfalls of Credit Card Debt Relief
Credit card debt relief is a major concern for millions of Americans.
It has been estimated over 25-percent of the U.
S.
population carries more than $10,000 in credit card debts.
Consumers who make minimum monthly payments will never break free from the cycle unless radical action is taken.
Credit card debt relief can be achieved in many ways.
One of the more popular choices is enlisting help from debt settlement companies offering the promise to reduce balances by upwards of 60-percent.
While it is true debt settlement can sometimes negotiate outstanding balances, consumers often spend as much money settling their debts as they would paying creditors directly.
Most debt settlement organizations assess a startup fee and monthly fees until debts are paid off.
Fees can amount to as much as 50-percent of the amount of settled balances.
For example, if debtors owe $20,000 in credit card debt and the debt settlement company negotiates the balance to $10,000; debtors save 50-percent.
However, debtors could pay between $5,000 and $10,000 in settlement fees; resulting in minimal overall savings.
Individuals who elect to use services of debt settlement companies should take time to calculate the true costs.
Prior to signing a contract with any settlement company, debtors would be wise to visit the consumer watchdog site of ConsumerFed.
org.
Debtors with high levels of credit card debt often turn to personal bankruptcy to obtain financial relief.
This option can cause more harm than good and should be carefully considered.
Many people believe bankruptcy will eliminate their debts and provide a fresh start.
However, this is rarely the case.
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act which requires debtors to repay a portion of their debts under Chapter 13.
Debtors establish a payment plan which typically extends for 2 to 3 years.
Chapter 13 payments are in addition to regular monthly expenses and can consume upwards of 60-percent of disposable income.
Consumers who are already struggling to make ends meet will find Chapter 13 payments extremely constrictive.
If debtors are unable to meet Chapter 13 payment obligations, creditors have the right to petition the court and request the bankruptcy be dismissed.
If this occurs, debtors fail out of bankruptcy and are no longer offered protection through the court.
Creditors can commence with collection action including repossession of assets, obtaining creditor judgments, or wage garnishment.
When consumers file personal bankruptcy they must obtain credit counseling through an agency approved by the U.
S.
Trustee.
Individuals carrying excessive credit card debt should obtain counseling prior to filing bankruptcy when possible.
Bankruptcy laws allow debtors to enter into credit counseling up to 180 days prior to submitting their petition.
Oftentimes, consumers can avoid bankruptcy by obtaining counseling.
Most agencies are connected within the credit industry and can help consumers negotiate outstanding balances by obtaining a reduced interest rate or reducing the amount owed.
Consumers that own real estate might be able to obtain a home equity loan to pay off credit cards.
Home equity loans are assessed a substantially lower rate of interest than unsecured loans.
Using a home equity loan to pay off high interest loans can save debtors a large sum of money.
However, this option can place real estate at risk for foreclosure if borrowers default on loan payments.
Overcoming staggering debt requires time, commitment, and a get out of debt plan.
Consumers should explore all debt reduction options such as budgeting, debt consolidation, debt settlement, and credit counseling to determine which strategy is best suited for their needs.
It has been estimated over 25-percent of the U.
S.
population carries more than $10,000 in credit card debts.
Consumers who make minimum monthly payments will never break free from the cycle unless radical action is taken.
Credit card debt relief can be achieved in many ways.
One of the more popular choices is enlisting help from debt settlement companies offering the promise to reduce balances by upwards of 60-percent.
While it is true debt settlement can sometimes negotiate outstanding balances, consumers often spend as much money settling their debts as they would paying creditors directly.
Most debt settlement organizations assess a startup fee and monthly fees until debts are paid off.
Fees can amount to as much as 50-percent of the amount of settled balances.
For example, if debtors owe $20,000 in credit card debt and the debt settlement company negotiates the balance to $10,000; debtors save 50-percent.
However, debtors could pay between $5,000 and $10,000 in settlement fees; resulting in minimal overall savings.
Individuals who elect to use services of debt settlement companies should take time to calculate the true costs.
Prior to signing a contract with any settlement company, debtors would be wise to visit the consumer watchdog site of ConsumerFed.
org.
Debtors with high levels of credit card debt often turn to personal bankruptcy to obtain financial relief.
This option can cause more harm than good and should be carefully considered.
Many people believe bankruptcy will eliminate their debts and provide a fresh start.
However, this is rarely the case.
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act which requires debtors to repay a portion of their debts under Chapter 13.
Debtors establish a payment plan which typically extends for 2 to 3 years.
Chapter 13 payments are in addition to regular monthly expenses and can consume upwards of 60-percent of disposable income.
Consumers who are already struggling to make ends meet will find Chapter 13 payments extremely constrictive.
If debtors are unable to meet Chapter 13 payment obligations, creditors have the right to petition the court and request the bankruptcy be dismissed.
If this occurs, debtors fail out of bankruptcy and are no longer offered protection through the court.
Creditors can commence with collection action including repossession of assets, obtaining creditor judgments, or wage garnishment.
When consumers file personal bankruptcy they must obtain credit counseling through an agency approved by the U.
S.
Trustee.
Individuals carrying excessive credit card debt should obtain counseling prior to filing bankruptcy when possible.
Bankruptcy laws allow debtors to enter into credit counseling up to 180 days prior to submitting their petition.
Oftentimes, consumers can avoid bankruptcy by obtaining counseling.
Most agencies are connected within the credit industry and can help consumers negotiate outstanding balances by obtaining a reduced interest rate or reducing the amount owed.
Consumers that own real estate might be able to obtain a home equity loan to pay off credit cards.
Home equity loans are assessed a substantially lower rate of interest than unsecured loans.
Using a home equity loan to pay off high interest loans can save debtors a large sum of money.
However, this option can place real estate at risk for foreclosure if borrowers default on loan payments.
Overcoming staggering debt requires time, commitment, and a get out of debt plan.
Consumers should explore all debt reduction options such as budgeting, debt consolidation, debt settlement, and credit counseling to determine which strategy is best suited for their needs.
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