Do you Need Debt Relief?

Do any of the following situations apply to you?

  • You run out of money before you run out of days in the month
  • You don’t sleep because of the stress from your debt
  • All you can afford are minimum payments on your credit cards.
  • You screen your calls to avoid speaking to collectors.
  • You have no idea how much you owe.
  • Your argue with your wife or your husband because of the stress of your debt
  • Your ratio of credit card debt relative to your income meets or exceeds 20 percent.
  • You hide your monthly statements from your partner, or spouse because you have overspent.
  • After you pay your credit card bill, you increase your balance by the same amount (or more) the following month.
  • You're at or near your credit limit on your credit cards.
  • You take out cash advances on your credit card to pay other bills.

We are a Debt Settlement Company and Can Help You

Debt settlement is the practice of reducing the total dollar amount that you owe to a credit card company, or other entity to which you owe money. It is aggressive, effective, legal, and is a practical alternative to bankruptcy. In addition, it takes advantage of the very practices that are employed by collection companies, and places those practices into the hands of the consumer’s representative. Debt Settlement is a legal and appropriate solution for consumers owing large balances on credit cards, make only the minimum monthly payment and / or have already fallen behind. It is the soundest method of debt relief available to the American consumer.

Credit Counseling as a form of Credit Card Debt Relief

Credit counseling involves working with credit card companies to stop interest accumulation, lower interest rates, and help a consumer with a budget that allows them to live on a cash basis. Consumer Credit Counseling involves the surrender of your credit cards, and structures a plan whereby you pay one monthly lump sum to the counseling service, after your budget has been recalculated to divert the largest amount of your income that is reasonably possible to the collective “debt pool”. Each debt holder is then distributed an equal share of the “pool” each month until the entire debt is retired. As each party within the pool is paid off (smallest to largest) the remaining debt holders receive a larger piece of pie until the last debt is retired.

It can be effective, but is more invasive and takes longer to achieve the end result. And there is no advantage to your credit score as it does not stop a debt holder form reporting to your credit bureau. In fact, once enrolled into Consumer Credit Counseling, the fact that you are enrolled is notated on your credit report, which is not desirable.

The essential difference between Consumer Credit Counseling and Debt Settlement is a question of philosophy, practice and financial results. The greatest disparity between the two being the total amount owed and paid by the consumer at the end of each respective program, with Debt Settlement providing the better financial end.

Debt Relief with Bankruptcy

In 2005, the federal government amended the bankruptcy protection act to favor banks issuing credit cards. This was due to consumers (and attorneys) abusing credit cards and charging them to their limit with the assumed intention of filing for bankruptcy after such charges were incurred. The law now states that any aggregate amount of purchases (this means on one card or several) that amount to $500.00 or more within 90 days of filing for bankruptcy protection cannot be discharged. To make matters worse, while you are in the bankruptcy process, collection attempts will stop, but interest on the non-dischargeable amount of debt on your credit cards will not cease its accumulation and will no doubt be subject to an increase to the maximum amount allowable by law – 29.9%!

Bankruptcies should be considered a last resort for any consumer. Not because of the severe credit implications, but because consumer debt is no longer completely protected under the law. However, there are times when bankruptcy is sound, and appropriate. This would mostly be in business situations in which the debt owed is structured under a business that is not incorporated and considered a sole proprietorship. In this case, the business debts fall to the “owner” of the business, a person.

In a Chapter 7 bankruptcy, a debtor liquidates non-exempt assets of value and pays the creditor with the proceeds from their sale. For consumers who do not have any assets of value, consumer debt is alleviated except under those circumstances previously mentioned under the new bankruptcy amendments of 2005. If you are a business owner, operating as a sole proprietorship, Chapter 7 bankruptcy can fast and inexpensive, relieving most of your debt.

A Chapter 13 bankruptcy is considered the worst unsecured consumer debt relief option because it has all the negative credit implications of a personal bankruptcy filing, but you still have to pay back a substantial portion of the debt. In a Chapter 13 bankruptcy, you have to turn over your disposable income to the courts for up to 5 years before you are finally relieved of your obligation to pay back the debt. It is widely used as a debt relief solution for secured debts like mortgages and automobiles, not credit cards.

Credit Card Balance Transfers

We do not under any circumstances endorse the transfer of credit card balances as a means to reduce debt. The illusion is that debt is reduced because the amount of interest on a favorable offer is less than the current annual interest rate. But the interest is not the debt. By definition, the debt is the principle amount owed. The interest rate charged is amount you pay for the money you have used. Transferring the balance from one credit card to another does not under any circumstances reduce the debt owed, but will reduce the stress to your monthly cash flow. Transfers of this nature should only be employed when one is committed to getting out of debt, and are transferring the balance from one credit card to another as part of a strategy to free cash flow in order to leverage more cash to the reduction of debt, or the total amount of money owed to creditors.

Using your Home Equity for Credit Card Debt Relief

Never use your home to pay off or consolidate debt unless you have enough equity in your home to absorb you total outstanding debt, and you can obtain an interest rate favorable enough to not increase your mortgage payments by any significant level.

Liquidating your IRA to Pay off Credit Card Debt

This should not be considered under any circumstances. The tax penalties for early withdrawal compound the cost of the debt to enormous levels. So you are literally losing money on both ends.

Borrowing against a 401(k) as a Credit Card Debt Relief Solution

There are two types of people, those who do not understand interest and pay it, and those that do and collect it. Borrowing against your 401K plan is not recommended because any interest paid on the loan off-sets the interest being paid to the 401K. This is particularly penalizing if you are an employee working under a 1040 tax form because you have very few tax shelters. The United States tax laws are set up by business owners for business owners. A 1040 employee’s limited tax breaks include a 401K with deferred tax. Again, when you pay out interest against your 401K plan, you dilute the interest you collect from your 401K and lose money. Do not engage in this activity.

Liquidating Assets to Pay Off Credit Card Debt

This is not only a sound practice but is ethical, responsible, and fair. Look, if you own a boat, have equity in a vacation home, a time share, or other types of luxury property and cannot make your payments on your credit cards or other unsecured debt, it is your obligation to liquidate as much as possible without debilitating your lifestyle and future capacity to earn. Have your assets appraised. There are many internet sites that can do this for you and give you very accurate estimation of the worth of your assets. This is an honorable thing to do, and you will always have the ability and the good name to rebuild your assets in the future.