Pay Off Debt- You Have Options

Sept. 30, 2009 - PRLog -- Credit card and unsecured debt piling up can create a snowball effect and several adversities therein. Disrupting any means to budget your bills, increasing fees and minimum monthly payments are hurting Americans nationwide. Credit debt alone is making it harder and harder for consumers to stay afloat, much less get ahead in these trying times. This ongoing crunch on the economy and job instability has created crossroads to crashing points on the road to financial freedom, leaving many Americans in disarray.
In lieu of, there are many ways which you can eliminate your debts and become debt free.
•   Credit Counseling
•   Debt Settlement
•   Bankruptcy
A credit counseling program is also known as a debt management plan. Credit counseling is the process of consolidating all your unsecured debts into one payment plan through an agency where lower, fixed interest rates (APRs) are obtained and late, over limit, and past due fees cease once enrolled. You make a payment each month to the agency and they send payments out to each one of your creditors every month. The creditors still send you statements monthly which show the reduced rates and the payments being made on your behalf by the credit counseling agency. The biggest advantages with this method is the convenience of one monthly payment, a reduction in fees, the stopping of additional fees, and an improved credit score over time from the consecutive monthly payments and continuing balance reductions.  Your best bet in this arena is to work with a non-profit agency that you’ve verified with the BBB as a reputable company.
While both debt settlement and credit counseling agencies use the term debt management, they are both very different means to eliminating your unsecured debts. Debt settlement programs negotiate the balance due down by 50-70 percent. You make 1 monthly payment to the settlement agency as you would a credit counseling company. The difference though is that the payments with a settlement company are usually held in an escrow account and not paid monthly to encourage better negotiations 12-16 months later as funds build from your monthly installments. An account cannot be settled on until the account has reached a charged off status, meaning the debt has been delinquent for more than 6 consecutive months. A charged off debt remains on your credit as a negative mark for 7 years, regardless if the debt is paid in full or not. Once a settlement company does reach an agreement, the difference saved is then considered taxable income by the IRS and you’ll be sent a 1099 form to file the savings. This option best suits those whose accounts are already in a charged off status and owe less than $3k.
If you simply cannot afford your bills and have fallen considerably behind it may be time to consider bankruptcy. Consumers who have lost their job or have come to the point where its down to paying their credit cards or their rent may not have any other alternative and can seek free legal counsel to confirm. A non-profit budget counseling agency will administer a free budget counseling session with consumers to review and account their debt to income ratio on a monthly basis. This is done to help the consumer assess where theyre currently at and establish goals as to where they want to go in their financial future. A budget analysis is also required when applying for bankruptcy as the creditors will want to know why you can no longer make your payments. Bankruptcy is considered a last resort and should be consulted with an attorney. A good law firm will provide a free consultation or a reputable non-profit agency can point you in the right direction after assessing your debt to income ratio.
Any of the above methods can help eliminate debt, it just depends on your specific situation- Where youre at, where you want to go, and how you will get there. There are many free consultation services that can help you make an educated decision as a consumer to find out and explore which option best suits your financial situation. These agencies are usually non-profit, credit counseling agencies offering free budget counseling, etc. Most of these consultations are free with no obligation and should be conducted by a certified credit counselor. As always, before you do business with anyone be sure to verify their reputation with the Better Business Bureau at www.bbb.org.
For more free information or a free budget counseling session to assess your finances and see what option is right for you,  please call 800.905.1563 or complete an application on our website www.freedomdm.org  to speak to a certified credit counselor. Cant pick up the phone? Go to our website and click on the live chat button to speak to a certified credit counselor, just minimize the window so your boss doesn’t see!

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Certified credit counselors work with potential clients to assess their current financial situation and determine what their best option may be.