4 Legal debt relief programs to save money and credit

Ans: It depends on the program you’re choosing. If you opt for debt settlement, your credit score may drop slightly since you’re paying less than the original amount. But you can always rebuild your credit in the following ways. Debt consolidation or management helps to improve your credit score gradually. Honestly speaking, it’s all about the utilization ratio.

If a debt solution (be it settlement or consolidation) helps to lower your overall utilization ratio (balance-to-limit ratio), then your credit score will increase. Suppose, your overall utilization ratio drops from 90% to 20% after settling or consolidating credit cards. In this scenario, your credit score will improve.

Just make sure you don’t close your credit card accounts since that would again affect your utilization ratio badly. If you have a high utilization ratio on one card, you can counterbalance by having a low overall utilization rate.

Ans: Hardship programs are a bank’s loss mitigation effort for collecting debts. Usually, banks offer these programs when existing account holders fall behind their payments due to financial hardship like job loss or prolonged illness. These programs create a repayment plan as per the affordability of account holders. So it becomes easier for them to make payments.

• Q: What happens in hardship programs?

  Ans: In a hardship program, creditors lower the interest rate, reduce fees, and pull down the minimum payment amount so that consumers can pay off the credit card balance. The idea is to help consumers and also reduce their loss margin.

• Q: How long does a hardship program last?

  Ans: Usually, it lasts for 6 months to 1 year. In some cases, it can last permanently till the balance is paid off.

Ans: You don’t have to pay any upfront fee to OVLG for settling or consolidating your debts. All you need to pay is a success fee of 15% on the total enrolled debt. You have to pay the fee after a debt has been paid off. You have to pay a monthly consultancy fee of $50 for 30 minutes consultation with our savings consultant, tax attorney, and budgeting consultant. This fee is adjusted with the success fee after your debt is paid off. If you opt for budgeting and bill payment services, you have to pay $50 for the first 10 monthly recurring bills. Thereafter, you have to pay $5 for every extra bill.

Please note: The fee structure varies from companies to companies. OVLG charges a very nominal fee for managing your debts. But most law firms charge a higher fee for settling or consolidating your debts. Some fraudulent companies don’t even follow the FTC rules and guidelines. They charge an advance fee without doing anything. Know more about OVLG fee structure

• Don’t ignore your secured debts for paying off unsecured ones
• Don’t borrow against your retirement saving accounts
• Don’t use cash-out refinancing for clearing unsecured debts
• Don’t make hasty decisions just because collectors are harassing you
• Don’t pay a single penny without getting a written agreement

Ans: You have to pay tax if the creditor forgives more than $600. Suppose, you accrued a credit card debt of $20,000. Obviously, you didn’t pay any tax on that amount since that was not your income. You used the money for fulfilling your needs but didn’t pay back your creditor. Thereafter, you enrolled in a debt settlement program, negotiated with your creditors, and convinced them to reduce your payoff amount. If the creditor agrees to reduce your payoff amount to $11,000, you have to pay tax on it since the IRS will consider $9000 as your income.

Ans:There are several nonprofit debt consolidation and settlement companies who can help with debt relief and discover various ways to save money without charging any fee. Some nonprofit credit counseling agencies charge a nominal fee for offering solutions that are best suited to your financial situation.

Be careful when you work with a nonprofit company because fraudsters always want to take advantage of cash-strapped consumers.

There are numerous instances where consumers have been scammed by fake nonprofit debt settlement or consolidation companies. Scammers open fake nonprofit companies to lure consumers with the promise of ‘free debt relief services'. Once consumers join the program and disclose their confidential financial information, scammers stop all sorts of communication. They use all the financial details for their own profit.

A nonprofit organization has a 501(c)(3) certification. Before working with a nonprofit organization, check if they have the mandatory 501(c)(3) certificate.

Ans: Like IRS, the federal government has lots of repayment plans for the distressed borrowers. Some of them are:

1. Federal Student Loan Consolidation
2. Permanent Disability Discharge
3. Public Service Loan Forgiveness
4. Income-Driven Repayment Plans
5. Teacher Loan Forgiveness
6. Perkins Loan Cancellation
7. Death Discharge
8. Closed School Discharge

Ans: The IRS has the power to garnish wages or seize assets when you don’t pay tax. So it’s better to get tax debt relief before it’s too late. Here are a few options you can take advantage of:

1. Offer in Compromise
2. Installment Agreement
3. Bankruptcy
4. IRS Forgiveness Program
5. Innocent Spouse Relief
6. How does tax debt relief work

Ans: Well, you don’t need to file bankruptcy for paying off your credit card debts. There are other ways to get rid of debts. You can enroll in a debt settlement program to lower your outstanding balance. OVLG can help to reduce your debt at an affordable fee.

If you don’t want to settle your credit card, then you can use a consolidation program to pay back your creditors. A consolidation program helps you pay off debt at a lower interest through an affordable payment plan.

Ans: Google is your best friend when you're exploring options for debt relief near you. Just type ‘debt relief near me’ in the search box. Google will do the rest of your job. They will show you the list of companies that are near your location. Check out the reviews and client testimonials of those companies to know which one can give you the best resolution. Call all the companies one-by-one and ask about the fee structure, tenure of the programs, and privacy policy to make the final decision.

Ans: Before you make the final decision, there are a few questions you should ask a counselor to avoid getting scammed. Here are a few of them:

1. Are you accredited or certified?
2. How do you plan to give me relief from credit card debt?
3. How much do you charge for your services?
4. When can I expect to be debt free?
5. Do you follow all the FTC rules and regulations?
6. Do you offer free budget counseling?
7. How can I monitor the progress of my case?
8. What happens if I leave the program midway?
9. Shall I get debt relief tips from you?

Ans: There are various ways to choose reputable debt relief companies. Some of them are mentioned below:

• Check the total industry experience of the company
• Read the success stories and reviews
• Check if the company offers 100% No Result Refund Policy
• Find out if the company is licensed and properly accreditated
• Check if the company follows the FTC guidelines
• Compare the free structure of the company with others
• Know if the company has a strong privacy policy