Every tool in a toolbox has its purpose. You have the hammer to thumb in nails, a plier to pull out objects, a wrench to twist bolts, and more.
Imagine bringing your hammer to a job that needs a wrench. If you can twist bolts with a hammer, it can only be described as one of God's miracles on Earth. But we all know that seldom happens. So, it's best to learn which tools do what and how to use them to get a job done.
Similar is the case with debt solutions. You have many choices - debt consolidation, debt management plan, debt settlement program, bankruptcy, and more.
It's only natural to be overwhelmed by the plethora of options when dealing with unpaid bills. But don't worry.
Here I'll explain the top 4 debt relief options and what works best in which situations. If you want an overview of the various solutions, read the whole article.
Otherwise, if you want a quick, personalized recommendation, talk to our expert for a free consultation.
Once you contact us:
Debt settlement helps to eliminate late fees and reduce your debt payoff amount and collection calls.
In this debt reduction program, debt settlement companies like us will work with your creditor(s) to reach an agreement where you need to pay significantly less than the total debt amount.
Debt settlement services can help you pay off your debt at a significantly lower amount. However, working with a debt settlement company is best only when you have a high amount of unpaid unsecured debt, making it challenging to make even the minimum monthly payments.
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Debt consolidation is rolling one or more debts into one by taking a new loan to pay off the older debts. You can get a personal debt consolidation loan or a balance transfer credit card with better loan terms and use it to pay off your existing debts.
The process of finding the right loan or card to consolidate your debt can be complicated as there are several creditors out there with their own pros and cons.
So, to make the process easier, you can enroll in a debt consolidation program. Enrolling in such a program can help you kick off your consolidation process faster and get expert guidance on budgeting and debt repayments.
If you want to try debt consolidation on your own, you'll need a fair to good credit score. You'll also need to be disciplined enough to curb impulsive spending habits to avoid running up more debt.
If you don't have a good credit score, you can enroll in our debt consolidation program, for we can help you out even if your credit score isn't up to the mark.
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A debt management plan is a carefully put-together payment schedule set up and managed by a debt relief company or a credit counseling agency.
With our debt management plan, you'll be able to reduce interest rates on your unsecured debts and eliminate penalties.
We will help you get back on the right financial track by helping you construct an effective budget, keeping "paying off debt" as the focal point, and establishing a favorable payment plan by negotiating with your creditors.
Debt management plans or DMPs are usually best for people who are knee-deep in debt but can still make the minimum required monthly payment. You'll also have to check whether your debt qualifies for the plan.
For example, if you have secured debts and some unsecured loans, such as federal student loans, we can only offer you credit counseling on tackling such debt; you'll need to manage those payments independently. If it's a private student loan, we can help you out.
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Bankruptcy is the last resort to get rid of debts.
It discharges most of your financial liabilities completely. In Chapter 7, the bankruptcy trustee liquidates your assets to satisfy your creditors. Chapter 13 will help you propose a repayment plan according to your affordability and pay your bills in 3 to 5 years.
When your consumer debt grows to such an extent that no debt relief strategy can help you pay off your obligations in five or six years, even if you resort to severe financial measures, filing for bankruptcy is the best option.
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It depends on several factors -
|Debt Solution Services||Time it Takes (Typically)|
|Debt settlement||3 - 4 years|
|Debt consolidation||6 - 9 months|
|Debt Management||3 - 5 years|
|Bankruptcy (Chapter 7)||4 months|
|Bankruptcy (Chapter 13)||3 - 5 years|
We have a reasonable FTC-complaint fee structure. That means we will only charge a fee of 25% of the total enrolled debt when our solution works for you. You don't have to worry about any upfront fees or hidden charges.
We charge a monthly consultancy fee of $50 for a 30 minutes consultation with the tax attorney, budgeting consultant, and savings consultant. However, after your debt issues are resolved, we adjust that amount with the success fee.
Here are a few ways each debt relief option can affect your credit:
Debt settlement shows on your credit report and can affect your credit score negatively. However, in your desperate financial situation, the trade-off would be worth it, as you'll be able to pay off your debt and focus on building your credit score again.
How much of an effect a settlement will have on your score depends on several factors like - the current condition of your credit; the reporting practices of your creditors; the size of the debts being settled; whether your other debts are in good standing; how much less than the original balance the debt is settled for and more.
Debt consolidation doesn't impact your credit score much if you manage the repayment of the new loan correctly.
The score drop results from a hard inquiry that your creditor makes to extend you a new loan or a balance transfer credit card.
With debt management, your credit will not take any hit if you stick to the mutually agreed repayment plan. Your score, however, may temporarily dip as you'll need to close the indebted accounts you enroll in the program.
The overall effect of DMP will be nothing but great for your score as you gradually chip away at your debt.
Among the debt relief programs, bankruptcy does the most damage to your credit score.
A Chapter 7 bankruptcy remains on your credit reports and affects your credit score for ten years from the filing date, and a Chapter 13 bankruptcy remains on your reports and affects your score for seven years.
Regardless of which type you choose, it will negatively affect the lenders' decision-making as they'll be able to see it on your credit reports.
However, bouncing back from the damage is easier than it seems. You can get back on your feet within a year, and you'll be way better off.
Bankruptcy stops wage garnishment instantly.
Debt settlement and consolidation can also help to stop wage garnishment. But in that case, you have to save a significant amount in advance so my assistant can offer an amount to stop wage garnishment.
You have to pay tax to the IRS on the difference between the amount you owe and the amount you paid.
For instance, if you owed $1000 and paid only $300, you have to pay a tax because your net savings are more than $600. The creditor will send a 1099-C form to you at the beginning of the following year, and you have to report $700 as your income at the time of filing your income tax return.
Don't ignore the 1099-C form because the creditor also reports the canceled debt to the IRS. So the IRS has all the details in its online database. If you don't report the 1099-C, you might be charged for the amount if they find out about the error.
Yes, once I start negotiating with your creditors and debt collectors, they will stop bothering you. If you file bankruptcy, they can't call or harass you for collecting debts due to a legal provision known as the Automatic Stay. The provision temporarily prevents creditors from trying to collect money as long as the case stays active.
If you don't pay off unsecured debts, creditors can file a lawsuit to receive a judgment against you and make you pay off the debt. If you still don't repay your bills, the creditors can garnish your wages or impose a lien on your home.
Creditors rarely employ drastic measures when you get personalized debt solutions from us since they don't want to get into legal hassles. Creditors want money, and when they receive it, they forget about lawsuits and imposing liens on properties.
If you're unhappy with our debt solutions, you can claim a refund. Most debt settlement or consolidation companies don't give a refund if your bills are not paid off. But this is an exceptional case. Always read the agreement carefully before hiring any debt relief company.
The bankruptcy option is available even when you're in jail.
A debtor's prison doesn't technically exist. Still, you can land up in jail for not participating in the post-judgment discovery process.
If you don't respond to discovery and refuse to appear in court, the creditor can request the judge to issue a civil warrant for your arrest.
Once you get arrested, the only way to get out of jail is to pay what you owe. Remember, judgment has the option to add interest. So, you may owe hundreds or thousands of dollars.
Consult a bankruptcy attorney for advice if you don't have money to pay the outstanding debt.
The best part of debt solutions is that you won't have to sit through harassing calls anymore. If a debt collector calls you, inform them that you have enrolled in a debt elimination program. At that point, they should talk to us immediately.
Have a glance at the debt collection laws of your state since collection agencies have to follow specific rules when negotiating with you. If a debt collector violates the regulations, you can file a lawsuit against them.
There are credible debt relief companies out there. However, amidst them hides scammers who make outrageous promises to make you pay for their services, but when the time comes to implement their plan, it all goes to waste.
If you come by such scammers, report it to the -