Legitimate Debt Relief Programs

There are only 4 ways besides simply paying the entire amount to your creditors to get rid of your debt.  Each solution has it benefits and it drawbacks.  Before you chose any of them you should talk with your tax professional and understand that each can have negative ramifications for your credit but when you are overwhelmed with debt it makes sense to come up with a plan to get rid of it.

                                                                                              

Consumer Credit Counseling

One of the other very common debt consolidation programs is that of a consumer credit counseling program. This type of plan has its respective pros and cons just like any method of debt relief. The benefits of such a program are usually getting a lower interest rate on the debts owed, also if the debtor is a few months behind on the payments the creditors will waive those penalties and re-age their account putting them back to a current status.

Perhaps the biggest benefit of credit counseling is that the program is set up on a fixed payment schedule, not the monthly minimum payment. This fixed payment schedule allows the debts to get paid off at a much faster rate, typically the entire credit counseling program will range between 4-7 years, depending on the creditors and amount of debt owed.

There are however a few downside’s to credit counseling, one is that while there is a reduction in interest there is no actual reduction of the balances themselves. Another problem for many people who want to join credit counseling is that the payments are usually very similar and in some cases even high than what the debtor was paying out in monthly minimum payments. So for such debtors who really cant afford to pay their debts by themselves this may not be the best option.

One more issue with credit counseling is that if a few payments are missed the creditors, not the credit counseling company, will kick the debtor out of the program revoking the benefits such as waiving of penalties and a lower interest. Statistics have shown that credit counseling programs have close to an 80% failure rate!

Debt Consolidation Loan

Another option for credit card debt relief is to obtain a debt consolidation loan. Typically debt consolidation loans require some sort of collateral to be put up against the loan, in many cases equity in a home. This is not a very wise financial move, in essence what someone is doing is transforming their low risk unsecured debt into high risk secured debt. This now places the debtors home at risk should they not be able to make good on the payments.

Statistics have shown than the majority of people within five years of getting a debt consolidation loan end up right back where they were in credit card debt, except now they have an additional secured loan that must be met first, in many cases forcing people into a bankruptcy situation where they would be lucky to keep their home.

Bankruptcy

Many individuals feel overwhelmed and quite a few choose bankruptcy as a debt consolidation program. Bankrupt has been around for hundreds of years and in the past was the catch all way of credit card debt relief. People would accumulate massive amounts of debt then file for the protection of the courts though Bankruptcy.

In 2005 the banks lobbied to have the laws changed regarding bankruptcy. The bankruptcy abuse act was passed making it much more difficult for an individual to qualify for bankruptcy. Most people will now only qualify for a chapter 13 form of bankruptcy which is essentially a repayment program. The court will do a means test to determine how much they feel you can afford and from there have you pay back your creditors, sometimes as much as 90 percent of what you owe, on a payment program.

Debt Settlement

With the economy the way it has been the above mentioned options have not really been working for many people, this is one of the reasons that debt settlement has become such a popular debt consolidation program. When compared to the amount of money and time saved for most folks debt settlement will be the best route.

To learn more go to  Legitimate Debt Relief