Why do you think people opt the debt settlement options? It is nothing more than an attempt to get the creditors agree to cut back the consumers’ entire balance to zero or less half in exchange of the lump sum payment. You have to take it as the full payment mode.
Her we are going to discuss the two options to fight back the debts that have occurred after bankruptcy and the immense use of credit cards.
Debt settlement, carried out in two popular ways – either through do-it-yourself methods or with the help of a debt settlement company.
What happen when you do not have enough money to settle debts with your creditors?
Actually, this debt settlement programs are able to save a lot. Before you sign in as a consumer in the debt settlement agencies, you have to analyze your financial status and credit report, and then enroll your account.
What qualification consumer needs to opt for a debt settlement program? – Total debt amount of $10,000 including past due accounts.
The consumer gets a chance to save in their own account, once they register in the company. The settlement company will also offer them to hold open accounts with a third-party financial handling company, to avoid any kind of issues.
What is so good about the debt settlement companies? Well it is more of a psychological benefit that a reduced debt can offer the consumer. Say, a balance of $10,000 reduced to more or less half, and you are going to pay it within three years. Well with all good things bad part are also associated. However, the first point is to get rid of the debts. Consequences of debt settlement come after whole debt get settled.
Generally, on the credit, debt settlement and their signs stay for 7 years, and no legal means removed from it. However, it is not so strenuous like the bankruptcy. You have to face the tax implication due to debt settlement. As the IRS expects that, you will report about the forgotten debts to the income tax departments.
Debt management plans another alternative for bankruptcy. Whereas, experts are of the opinion that credit counseling is better if the balance is below $10,000. Credit counseling is a debt negotiation program, but there is a little difference, the debt management companies settle the balance, but credit counseling negotiates the interest rates.
Another difference is that credit counseling always works over the current accounts and not on the open or saving accounts. Creditors will actually find a point in settling the interest rates if the account is still current.
Well, the question comes how much will it cost.
According to the recent changes in the Government laws, debt relief law suggests that it will prohibit the charge on upfront fees or charge fees without settling a debt. Non-profitable credit counseling is not affected unless and until you work upon it.
The credit card consolidation program is non-profitable, but Debt Management Plan would cost around $25/month. Whereas, debt settlement companies charge 15% of your total debt amount -spread over 18 months or they might charge between 20-25% of the settled amount.
Gary Wills is a debt management consultant associated with prominent debt settlement agencies of the USA. His company uses outbound calling campaigns to provide a befitting customer service to the people who register as their potential clients.