Can't make the minimum credit card payment? Here are
the options.
There's always a lot of interest in credit card debt -
that's the trouble!
Credit Card Debt - Elimination Or Consolidation by :
Susan Megge
You’re at the end of your rope and you simply can’t do it anymore.
You’re drowning in debt and sick and tired of trying to gather enough
money each month just to make the minimum payments due on your credit
cards. You can be certain that you’re not alone. There are many people
who are facing a financial crisis much like the one with which you’re
dealing. It’s overwhelming and scary, especially if your accounts are
delinquent and you’re receiving threatening and harassing calls and
letters from debt collectors. Take comfort in knowing that you will
overcome this financial burden because, fortunately, there are options
available to you.
Credit Counseling
When you sign up for a credit counseling service, credit counselors
contact your various creditors to work out a repayment plan, usually
negotiating reduced interest rates and payments. You’re then required
to make one monthly payment to the consumer credit counseling service
and they in turn distribute the funds each month to your various
creditors. If you’re considering this option, it’s important to do
your homework. Many credit counseling agencies are funded by your
creditors, therefore, you’re left to wonder whether or not the credit
counseling service is legitimately interested in what’s best for you,
the consumer. Also, just because credit counseling services claim to
be "nonprofit" organizations, it doesn’t mean their services are free
or affordable. In fact, many of these firms aren’t even legitimate.
Again, do your homework to be sure this is the best route for you, as
entering into a credit counseling agreement can take five years or
more to pay off your debt.
Debt Consolidation
If you have sufficient equity in your home, you may be eligible to
obtain a second mortgage or home equity line of credit. This could
possibly enable you to lower the cost of your credit with an interest
rate reduction. While the thought of paying off your credit cards with
a reduced interest loan is tempting, be very cautious prior to using
your home as collateral. If, at any point during the term of the loan,
you are unable to make your payments, you could lose your home. Also,
it’s crucial to shop around, as the cost of a home equity loan can add
up quickly if you’re required to pay points. When you look closely at
the bottom line, you want to see that you’re ahead – not still
drowning in debt.
Bankruptcy
Generally, bankruptcy is considered as a "last resort" for most people
due to the fact that bankruptcy is a matter of public record and its
ramifications are long-lasting. As you’re probably aware, there are
two forms of bankruptcy - Chapter 7 and Chapter 13. Chapter 7 is known
as "straight bankruptcy" because your debts are discharged and no
repayment plan is required. As a result of the new bankruptcy law that
went into effect back in October 2005, however, many people find that
they’re no longer eligible for Chapter 7 bankruptcy and instead must
file Chapter 13 bankruptcy. Chapter 13 bankruptcy requires a
court-approved repayment plan, usually over a period of five years or
so. After all payments have been made, you receive a discharge of
debts. Another major hurdle as a result of the new bankruptcy law is
the requirement to get credit counseling from a government-approved
organization within six months before you file for any type of
bankruptcy relief. If bankruptcy is your only option, be sure to ask
questions and hire an attorney with whom you’re comfortable.
Debt Settlement (Debt Negotiation)
Debt settlement is a process whereby most creditors will agree to
accept less than the full balance to settle outstanding debt. Debt
settlement has proven to be an excellent solution for many individuals
and businesses who may have otherwise found it necessary to file
bankruptcy. As with all of your options to become debt-free, be very
careful when choosing the debt settlement firm with you’ll be working.
For instance if you’re thinking about hiring a firm who will require
you to set up a trust account or pay a monthly fee, you may want to
think twice about that particular firm. Work with a company with whom
you feel you can trust to represent you with only your best interest
in mind.
In the end, what’s most important is that you resolve your debts by
choosing the option which will best meet your needs. Take a serious
look at your financial situation so that you can better decide which
path is best for you. Once you’ve made the decision to put your debt
behind you, you’ll feel a great deal of relief. It’s not necessary to
go another month with fears and concerns over your financial
predicament.
About the
author
Susan Megge is a consultant in the credit services industry.
Over the past several years she has assisted many individuals in
resolving their debt-related matters. For more information regarding
credit and debt visit
www.donaldsonwilliams.com
Source:
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