Choose the Right Debt Relief Solution· Debt consolidation - Requires that you apply for another loan or debt consolidation loan. Nearly impossible if you have bad credit. The loan may have to be collateralized by use of the equity in your home, thereby taking your unsecured debt and turning it into high-risk secured debt. Debt consolidators already have a pre-arranged agreement with the consumer's creditors to help recover their own losses. Not a smart move and there is a good chance you could be forced into bankruptcy or worse. Unlike debt settlement, debt consolidation will reduce your monthly payment with a lower interest rate, however you will have to pay off the entire balance on your way to becoming debt free. Common sense tells us not to go into debt to get out of debt. · Credit counseling - Non-profit does not always mean safe. Nearly every ad your see, hear or read are "non-profit organizations." Indeed they may be, however, most of these firms are funded in part by the very credit card companies and banks you're indebted to. If, and only if you meet your creditor's requirements, the "counselor" will get you a lower interest rate in most cases, but you will have to pay back the entire balance you owe. If you miss a payment, you may get removed from their program. These companies require that you set up a reduced and strict payment plan with your credit card company, while they collect a large up-front fee from you and a monthly maintenance fee, all while collecting a fee from your credit card company. You might as well file for bankruptcy because credit counseling will be reported as bad credit. 75% of all people in credit counseling do not successfully complete the program. · Bankruptcy - Recent reforms in US bankruptcy laws have made it more difficult for consumers to declare bankruptcy. In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) decreasing eligibility for people to file Chapter 7 bankruptcy, the most popular form of bankruptcy. Just like many other debt relief programs, you have to qualify for bankruptcy. If you do qualify, bankruptcy requires that you appear in court and will be a matter of public record. Bankruptcy will ruin your credit and stay on your credit report for up to 10 years. This should be a last resort option. |
