Debt Options
What are my options?
- BANKRUPTCY. This is an available option to get out of debt. A “BK” can be on your credit for up to 10 years and can be emotionally draining. Many people think this is a fast and easy way to becoming debt free, but a Chapter 13 bankruptcy could actually last longer than a debt settlement program and cost more per month. In fact, since October 2005, congress passed a bill to make filing for bankruptcy a lot more difficult.
- DEBT CONSOLIDATION. This is used as a generic term nowadays. Debt consolidation is taking unsecured debt that you currently have and moving it into a new loan. You will need a pretty good credit rating and considerable equity in your home. Being late on one credit card payment may hurt your chances qualifying for the consolidation. Also, your principal balance does not get reduced or settled, it just converts your unsecured debt to secured.
- CONSUMER CREDIT COUNSELING. A “CCC” program is another form of debt relief for people who are having trouble financially. This program can take longer than 6 years to complete. You will have to pay 100% of the principle plus interest. Consumer Credit Counseling program has a high cancellation rate and you can be terminated from the program with just one missed payment. If you have less than $10,000 in unsecured credit card debt and can follow the strict program, this is an option for you.
- CONTINUE MAKING MINIMUM PAYMENTS. Depending on how much you owe and your interest rates, this can take over 30 years to pay off. You will pay thousands of dollars just in interest alone and can pay over three times of what you currently owe. Also, having high balances on your credit cards will affect your credit score negatively and it might be harder for you to qualify for any type of loan.
- DEBT SETTLEMENT PROGRAM. This could be the quickest and most efficient way to get out of debt. In most cases, the program can reduce your balance anywhere from 40-60% on average and be out of debt in 12-48 months. Experienced negotiators will settle the accounts and report to the credit bureau as “paid as settled.” This will hurt your credit score because you will be defaulting on each account. Your credit at this point should be a secondary concern, while living debt free should be your first. You will be saving money into a third party “trust” account or your own bank account. This program can minimize collections calls which can be stress relieving.