My name is Steve Bis and I am assisting people that are in arrears with their credit cards for a quite some time and understand the effects it has on someone’s life. When you have credit card debt and think that this matter is no longer something you can control, you must make a decision and make it ASAP. You should not put it off until it is too late. As many of you must already know is that the collectors are not helpful when you call them with issues with your statement. It’s very remarkable the way it works because when you first obtain the card they are pretty nice people on the phone. Then if you contact them to argue against a late or over limit charge and try to have it waived enough to try and keep up with 8% or even the 7.9 % interest that they are charging on your credit cards. How are you suppose to deal with the higher payments now? It was dreadful enough to manage before the interest skyrocketed. This is why many Americans are searching for other options such as credit card debt settlement vs. credit counseling, or bankruptcy. If you do not know much about these options then I will give you a little bit of an education on them.
Bankruptcy
Prior to 2005 bankruptcy was to be used for debtors who were having serious monetary problems. Regrettably it was misused by thousands of debtors who were trying to avoid paying their credit card debts. They did not want to be accountable for their misgivings. The credit card industry was sick and tired of this so they petitioned to have the laws changed. It is now known as the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. It would make it more difficult for most debtors to file for chapter 7 bankruptcy. Bankruptcy should only be used as your very last choice after you have tried every alternative method. Also you should understand the negative aftereffects that might come back later down the road. You would have to hire a lawyer, go to court and that could run you a substantial amount of money. There is also the matter of it being on your FICO report anywhere from 7 to 10 years. When you are signing any significant application or document you will always have to say yes when asked the question about bankruptcy, so this does have a very negative long lasting effect on your ability to obtain future credit.
Credit counseling
Everywhere you turn, either on TV or the radio, you will hear about credit counseling. A credit counseling organization will try to get the credit card companies to lower the interest on your credit cards. You then make one monthly payment to the credit counseling organization and they then make your payments to each one of your creditors for you. The downside to this choice is even though they lower your interest on your credit card accounts you might still pay back as much as 130% of what you currently owe.
This is because on this sort of plan you will still be paying back what the full original balance was plus some of the interest for around 4 to 7 years. Almost eighty percent of the consumers that are in credit counseling don’t complete the program for missing as much as one payment. Another draw back to credit counseling is that if you have a cash flow problem and are cannot make your monthly payment they will kick you out of the program straight away. They will also increase your interest back up and the creditor could keep you off the program for a minimum of one year and sometimes even longer. This might put you right back to where you began, if not in a tougher situation.
Credit Card Debt Settlement
This is the debt relief method where you can save the largest amount of money. Honest debt settlement companies will save you at least 40% of what you currently owe. The 40% should include all the fees as well. Very much like credit counseling, you will hear a lot of TV and radio ads very frequently. These companies are popping up all over the United States. Some of these companies try to make it appear like they have a magical wand and are going to make all your debt vanish extremely easily.
There are also some companies that try to use religion to attain the trust of debtors. No matter what company you are going with it is your responsibility to due diligence on them. You can always begin with the BBB (Better Business bureau). You will be able to discover a lot about a company from them. If you soon realize that a company has only been in business for a short time and has a plethora of complaints against them, then you must avoid them. One more thing to keep an eye out for is how much time has the company been in business. Some companies only survive a couple of years before they get terminated or get caught with their paws in the cookie jar. Then some of them only stay around to make as much money as they can and close shop just to open up down the streetunder a new company name.
Steve Bis is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt reduction.
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