Debt Relief
Do Nothing
If your goal is to eliminate your debt then procrastination, otherwise known as “doing nothing” certainly will not help you achieve that goal. In fact this action will only prove to compound your current situation. Remember your credit card companies are not going to procrastinate or “do nothing,” In fact they will increase your interest rate to a default rate in some cases in excess of 24.99%, assess your account with late charges and interest that will continue to compound, causing your debt to grow, month after month. Although many choose this “do nothing” option as it seems to be a short term solution, we can assure you that it is not worth the long term damage. Choosing this option, will negatively impact your credit for years to come.
Making Minimum Monthly Payments
Making just minimum payments to your creditors, believe it or not, is just what these institutions want you to do. Credit card companies are well equipped to service your account for decades; take into consideration the interest and fees collected month in and month out, these firms are very profitable. At Emerge America we call it the Pay Forever Plan. The following example uses the debt calculator found on CNN Money, which clearly demonstrates this policy; $30,000 worth of credit card debt, apply a 19% interest rate and pay 2.5% of the total debt amount as your minimum monthly payment or $750. Using this scenario it will take you 36 years and 8 months to pay off the debt and you will have paid a total of $77,583.39 of which 47,583.39 is interest. Scary? Scary is not the word for it, what if the interest rate was 23% or higher! So you must be asking yourself what's the answer, right? Making more than the minimum payment is the only answer, then again if you could you would. I'll bet we're right again! Debt settlement companies can not and should not tell you to stop making your payments as it's considered Contractual Interference. Both the Debt Settlement company and the debtor can be sued, however, most imply just that in order to enroll you in their program. At Emerge America our debt settlement program is geared to folks truly suffering from some form of hardship, not those just trying to beat the system. If you are experiencing a legitimate hardship or based on certain circumstances see one developing in the near future, give us a call to discuss your options.
File Bankruptcy
Bankruptcy may seem quick and simple, however many people file for bankruptcy each year failing to realize they are forced to deal with the harsh effects that will plague them for what could be the rest of their lives. One must first be aware that bankruptcy does not go away after 7-10 years, as some bankruptcy attorneys may claim. The reality is nearly all credit applications ask if you have ever filed bankruptcy, and to answer falsely is considered a federal offense. Also, costly court and lawyer fees accompany the process of filing for Bankruptcy. And with changes in Bankruptcy laws, many consumers will not be able to eliminate their debt simply by filing for Chapter 7.
Consumers may now be required to file Chapter 13, which requires you to pay back a portion of your debt under the supervision of the court. This process may last for years. Bankruptcy should be considered one of the last remaining options in solving financial problems but you should always consult with an attorney regarding such matters.
Credit Counseling
- These programs are generally funded by the credit card companies themselves. The intent here is to assist you in paying back your debt IN FULL.
- Consolidates your bills into one monthly payment with possible lower interest rates and fees.
- Your balance will often take 4-7 years to pay down.
- Some creditors will “re-age” delinquent debt to show no longer past due after a series of successful in program on-time payments have been made.
- Overall fees of an average credit counseling program are equivalent to or greater than those of a debt settlement programs.
- You'll end up paying back your full balance plus some interest.
- This is often viewed by lending institutions as similar to Chapter 13 Bankruptcy.
- If you miss multiple payments you may be subject to paying back past interest at your prior to program rates.
Debt Consolidation Loan
There are essentially three types of borrowing methods available. There are debt-consolidation loans, balance transfers to another credit card, and home equity loans or lines of credit. While any of these methods may help some people get a handle on high interest debts, many others only find temporary relief and are right back where they started, in debt and in need of a real solution for paying it off.
Offers for these financial products may show up in your mailbox or e-mail everyday suggesting this as the solution to your growing debt problem. A major selling point of consolidation loans is convenience. Instead of paying multiple creditors who are charging different rates at different times of the month, you can potentially take out one big loan to pay off all your accounts.
The biggest myth about debt consolidation loans is that they're easy to get. While these loans may promise a low rate and no-hassle solution, many people in debt don't qualify for the advertised rate due to a high debt-to-income ratio or previous late payments on their credit report.
Even if you do qualify for one of these loans, it doesn't automatically translate to savings. Before you sign on the dotted line, be sure that the costs of the new, bundled loan will truly be less than what you're already paying various creditors. For many consolidation-loan candidates, their current credit woes mean they won't get the lowest-available interest rate. Plus, when there is nothing to secure the loan (such as your home), expect the lender to bump up the rate.
Debt Settlement/Debt Negotiation
Debt settlement, also known as debt negotiation, is a method that can actually erase as much as half of your unsecured debt. Unlike a debt consolidator who only repackages your debt, or a credit counselor who lets the creditor set the terms, and then compensates the credit counseling company, a debt settlement program is the only bankruptcy alternative that works solely on behalf of the consumer.
Debt settlement is an effective means of debt elimination without the long-term trade-offs and stigma of a bankruptcy.
Here's how it works. A proportion of the unsecured credit debt is literally forgiven. The debtor and creditor or collector agrees upon a reduced balance as settled. You can use a debt settlement company to do this or attempt it on your own. The do-it-yourself approach is not for everyone. It takes persistence and it can dial up the stress of an already stressful situation. So proceed with caution. Or better yet, hand it off to an expert.
Unlike debt consolidation or a credit counseling program, a debt settlement company does not make monthly payments to your creditors. Instead, you save funds each month, funds that are needed for the debt settlement company to negotiate your debt. You put aside these funds through a third party special purpose or escrow account (which is FDIC insured). A special purpose account offers you maximum protection from creditors.
Debt settlement is designed to work within your budget and to reduce and settle debt in the shortest time possible. Once you have adequate funds available, negotiations with creditors begin. Funds are disbursed only after you agree to the settlements that have been reached.
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