Helpful Resources

Alternatives to Bankruptcy

Tuesday, August 03, 2010 03:00 AM

With the downturn of our economy, many Americans are finding themselves in a constant battle with a never-ending mound of debt. Pay cuts, reduced hours, lay-offs, medical bills these are just a few reasons why many Americans have turned to rely on credit cards to make ends meet.

Drowning in a pool of late payments, increasing interest rates, penalty fees, and increasing balances, many consumers begin to consider drastic solutions like filing for bankruptcy.

However, filing for bankruptcy can be an emotionally tolling process and is often considered the option of last resort, thus an alternative to bankruptcy should be explored before choosing to file for bankruptcy.

There are two kinds of bankruptcy that are available for consumers to file for: Chapter 7 and Chapter 13. Chapter 7 bankruptcy protection eliminates an individual’s debt completely, although it is difficult to qualify for and can require a consumer to divest some or all of their assets to pay off creditors. Chapter 13 bankruptcy requires an individual to pay back a percentage of their debts, typically over a 3 or 5 year repayment plan, and a trustee distributes those payments back to the individuals creditors. Both of these bankruptcy types can seriously impair an individual’s credit score and credit profile, and make it extremely challenging for an individual to secure any kind of favorable loan for years.

But what some consumers may not know is that there are alternatives to bankruptcy. One of the most common is debt settlement, also known as debt negotiation. Debt settlement will not only get consumers out of debt quickly, but it can reduce balances by as much as 40 to 60 percent within an average time frame of 24 – 36 months. Consumers in debt might seek out a debt settlement or debt negotiation company that will work with their creditors to structure settlements at a reduced balance. While creditors may not normally consider settling if a consumer inquired directly, debt negotiation firms have relationships with the lenders to help structure these reduced settlements.

Another alternative to bankruptcy is debt consolidation. Under this method, a lender will issue a new loan that pays off all the consumer’s individual debts. This process is effective because while it doesn't reduce the debt, it consolidates the number of payments a consumer has to make per month to just one, and typically carries a much lower interest rate than credit cards or other types of debt. One drawback of this solution is that these loans are often difficult to qualify for due to a high credit score requirement.

Although having the security of credit to fall back on in dire times can be helpful, it can also be detrimental when consumers use the credit to spend more money than they can afford. With interest added onto the increasing balances every month, many consumers end up barely having enough to make minimum payments each month, thus leading them to consider bankruptcy as solution to get out of debt. But an alternative to bankruptcy is usually attainable as long as the consumer does their homework to choose a good company to work with and stays committed to the program.

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Debt Resolution

Saturday, July 31, 2010 03:00 AM

As the recent recession lags on, consumers are finding it harder to make ends meet, and many may have had to take on additional debt through credit cards and personal loans. In doing so, some have seen their monthly payment obligations grow quickly out of their control and have found themselves ina very difficult financial position.

For those that would like to explore alternative debt resolution options to bankruptcy, there are fortunately several possibilities, each with their benefits and drawbacks.

Consumer credit counseling (CCC) is a debt resolution program for those who are unable to make their minimum payments and are undergoing financial difficulties. However, CCC programs could take up to 6 years or longer to complete and they require an individual to pay back the full principal balance of the debt that is owed, albeit at a lower interest rate. Consumer Credit Counseling Services, on average, have very high rates of client cancellation, as clients often find that the payment relief is not enough to facilitate their hardship. With that being said, a CCC program may be a viable option for those with under $15,000 in unsecured debt, or those that are able to afford higher monthly payment obligations and are well disciplined to remain in the program.

Debt consolidation loans can be a great debt resolution option for those that can qualify for a good one. This option typically requires an above average or good credit rating and considerable equity in your home. If you have a very large debt balance and have been late on just one monthly payment, it is likely that your credit may be impaired. Also with this option, one does not realize any reduction in their principal balance. Individual debt accounts are just being rolled up and paid off through a new loan, often one that is secured by a home or other asset. While a debt consolidation loan coupled with a debt resolution program provides a very powerful solution, remember that debt consolidation alone does not reduce or settle your debt; it only shifts your debt from one place to another.

One of the fastest debt resolution options is called debt negotiation, which aims to settle your debt for less than the original balances owed. Debt settlement programs typically can settle unsecured debt for between 40% and 60% of the balances owed, and they also may enable you to become debt-free from your enrolled accounts in as little as 24 - 36 months. For example, through a debt settlement program, if you owe $30,000 to your creditors, you may be able to reduce your debts by $15,000 or more. While this enables a consumer to save a lot of money, there are also some challenges that clients typically face as well. Consumers will experience heightened collection calls, a negative impact to their credit rating, and risk the possibility of being sued, for example. While it is possible for an individual to pursue this debt resolution strategy on their own, there are many companies that professionally offer this service and can be very effective in achieving positive results.

Whichever debt resolution option a consumer chooses to pursue, they should be aware that there are risks involved and do their homework on the company that is providing the service. While no debt resolution process is going to be easy, there are good companies offering successful solutions that are worthwhile and have lasting benefits.

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Debt Management Relief

Saturday, July 31, 2010 03:00 AM

Many consumers may have found themselves falling deeper into debt with a handful of creditors over the last few years, and a growing number are looking for ways to find some debt management relief. Fortunately, there are a number of ways for consumers looking for debt management relief to approach the problem.

One common option is to have a consultation with a credit counselor, who will help put together a budget and a payment program for an individual to pay off the debt over a 4-7 year program. While this method won't actually reduce the principal amount of the debt, it oftentimes reduces the interest rates and the payments that the consumer is making. If a consumer can afford to make the program payment, and keep disciplined throughout the program to make timely payment, this program will achieve results. However, while one is in a consumer credit counseling program, they will have difficulty applying for any new loans, as many lenders consider such a program similar to a bankruptcy filing.

Debt consolidation is another debt management relief option that consumers may seek. Consumers that are carrying several unsecured debt obligations with high interest rates can apply for a debt consolidation loan, in which a bank issues a new loan for enough money to pay off all their outstanding debt balances at once. However, consolidation loans can be difficult to qualify for because they often require a high credit score and sufficient income levels. For consumers that are approved, they can consolidate their debt into one single monthly payment at a lower interest rate. If consumers choose to pay more towards their principal balance every month than the minimum payment, they can get out of debt more quickly.

Debt settlement, also known as debt negotiation, is a debt management relief option that has become much more commonplace in recent years. Also known as debt negotiation, debt settlement is the process of negotiating with creditors to achieve a payoff amount that is a substantial reduction to the current balances that are owed. Creditors are very willing to negotiate on debt balances that are in arrears, because if a consumer were to file bankruptcy, they stand to get nothing. In order to succeed in such a program, consumers need to diligently save the funds that are required to make settlements, which typically run between 40 and 60 percent of the total current balances. Consumers can try to negotiate with their lenders on their own or they can hire the help of a professional Company. There are pros and cons to both – but a good debt settlement Company can achieve results for consumers that are more favorable than what they could otherwise arrange on their own.

Whatever method consumers consider, they should first make sure to research all their debt management relief options and also do their homework on the companies offering the various services. It is important to be confident and disciplined towards the debt management relief method that is chosen to ensure one’s peace of mind and financial health in the long term.

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Reduce Your Debt Fast

Saturday, July 31, 2010 03:00 AM

Many consumers are deeply in debt and probably wondering how they can reduce their debt fast, especially those that are struggling to keep current with their monthly bills.

Although bankruptcy is an idea that oftencomes to the minds of most consumers first, it is far from being the easiest or the quickest way to reduce your debt fast. In fact there are several alternatives that can be considered better and faster solutions to reducing debt.

Four Ways to Reduce Your Debt Fast:

1. Debt settlement is the process of negotiating with creditors to achieve a payoff amount that is a substantial reduction to the current balances that are owed. Creditors are very willing to negotiate on debt balances that are in arrears, because if a consumer were to file bankruptcy, they stand to get nothing. In order to succeed in such a program, consumers need to diligently save the funds that are required to make settlements, which typically run between 40 and 60 percent of the total current balances and last between 12 to 36 months.

2. Paying more towards your debts each month is an option that may not seem possible for some, but for those of you who are truly committed to reducing your debt fast you may be able to work out a monthly budget that allows you to pay more towards your debt than before. This will not only reduce the principal balances more rapidly, but it will significantly cut down what you would otherwise pay in interest. It is usually best to focus on paying down the creditors with the highest interest rates first, while leaving those with the lowest interest rates for payoff last.

3. Another way to reduce your debt fast, or at least pay the debt off more quickly, is to simply contact one’s lenders and ask for a lower APR. While this method does not always work, it never hurts to try. Some consumers who have been able to stay current with their monthly payments might be able to talk their way into a more favorable rate. If a creditor knows that you have the opportunity to transfer your balance to another lender, they are likely to try and keep your business.

4. Speaking to a credit counselor, who can suggest a debt management plan that could help you pay off your debt within four to seven years, is another option. Although this method is not as quick, many counselors make consumers devote considerable time to a financial education process that will also help draw up a sound financial budget and eliminate unnecessary expenditures to further chip away at their debt. In a credit counseling program, consumers will pay back every dollar of the principal they owe, albeit it at a lower interest rate.

When you are looking for the best way to reduce your debt fast, you should explore all of your options and carefully consider the pros and cons of each process. Always make sure to do your due diligence on the companies offering the various solutions. While no reduction process is going to be easy, there are great companies that can help you get through a tough spot.

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Reduce Debt

Friday, July 30, 2010 03:00 AM

Many consumers across the country have run into financial difficulties over the last few years as the economy got worse. As a result, they may have seen their debt levels increase considerably and be struggling to keep up with their bills. It is more important than ever for individuals to reduce debt more quickly, and many are looking for sensible ways to do it. Unfortunately there is no quick and easy fix, and most methods to reduce debt take a long time and require total commitment to the process.
The most straightforward method for consumers to reduce debt is to simply pay more towards their debts each month. While this option may not seem possible for some, those who are truly committed to reducing debt may be able to work out a monthly budget that allows them to pay more towards their debt than they were before. This will not only reduce the principal balances more rapidly, but it will significantly cut down what they would otherwise pay in interest. It is usually best to focus on paying down the creditors with the highest interest rates first, while leaving those with the lowest interest rates for payoff last.

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Reduce Unsecured Debt

Friday, July 30, 2010 03:00 AM

Many consumers across the country are struggling with their large monthly payment obligations, and are having difficulties even affording the necessities they require to live comfortably. Some are unable to continue to pay their bills on time and are falling behind on their payments for their unsecured debt.

For many consumers, the most difficult types of debt to keep current with are their unsecured debts, mainly their credit cards, medical obligations and personal loans. Unsecured debts are obligations that are not supported by collateral and typically have higher interest rates. Secured debt, on the other hand, is debt that is backed by an asset, such as a home or a car. With secured debt, a creditor can often repossess the collateral if a consumer fails to make payments, and hence the interest rates are lower.

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Eliminating debt

Wednesday, July 28, 2010 03:00 AM

Many consumers may have found themselves deeply in debt over the last few years, as the economy sunk into a serious recession. A large number of Americans lost their jobs or had their hours cut back at work, forcing them to pay for more necessities on credit cards. Others may have found themselves with unforeseen debt due to hardships such as divorce or medical emergencies.

Whatever the reason, many people are looking for sensible ways of reducing and eventually eliminating debt. Fortunately for those struggling with unmanageable debt, there are a number of options available, each having their own benefits and drawbacks.

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Credit Card Consolidation

Tuesday, July 27, 2010 03:00 AM

Consumers across the country have continued to take on an enormous level of credit card debt over the last few years, as so many Americans have struggled to make ends meet in light of the recession and lack of available jobs in the economy.

With so much debt, consumers often attempt to spread their important purchases across a number of creditor accounts to avoid approaching credit limits and higher interest payments. However, this recurring process can create additional problems, leaving already-strapped consumers with the challenge of juggling multiple accounts. The pressure of keeping track of and paying off several high credit card bills per month can easily spiral out of control.

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Debt Consolidation Programs

Saturday, July 24, 2010 03:00 AM

Many consumers have found themselves up against significant amounts of debt spread across a handful of creditors over the last few years. They may have heard about debt consolidation programs that promise to consolidate debt and reduce monthly payments, while wondering how they work and whether they can deliver positive results. The good news is that many programs of this kind do deliver meaningful benefits, and what they accomplish is actually fairly simple.

Debt consolidation programs give qualified consumers a new loan that pays off several or all of their outstanding obligations. This new debt consolidation loan, by aggregating all of the individual debts and paying them off, often becomes the only loan that the consumer holds and makes payments to.

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Consolidating Credit

Friday, July 23, 2010 03:00 AM

Over the past few years, many Americans may have fallen behind on their monthly payments for obligations such as credit cards, mortgages, or loans for their car or education. And that debt can grow higher with each passing month until it begins to seem impossible to pay off. Fortunately for consumers, credit consolidation is a viable solution, especially for those who are reaching a breaking point and feel they are close to falling behind.

Consumers that owe money to a number of different lenders may consider consolidating their credit, which lumps the numerous loans they are carryinginto one new loan with one single monthly payment. Doing so can significantly reduce their monthly payments, as the new loan may have a lower interest rate and a longer duration than the individual loans.

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Debt Settlement

Wednesday, July 14, 2010 03:00 AM

Many consumers across America are struggling to pay their bills. They may be deep in credit card debt, behind on medical bills, have other debts they simply can't pay, or even a combination of the three. If this is thecase, they may have heard about a debt settlement program on the TV or radio and wondered if it can help them.

The offer to get out of debt by paying pennies on the dollar might sound too good to be true, but in many cases it is not. Debt settlement is a safe, legal way for consumers to get out of debt quickly, particularly when working with a successful provider of services.

The benefits of debt settlement are straightforward: settlement companies can reduce debt by approximately 50 percent because professional negotiators work on behalf of consumers to negotiate with their lenders. The strategy typically reduces a consumer’s monthly payment substantially, and programs generally do not last longer than three to four years, so there is light at the end of the tunnel.

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About Debtmerica

Debtmerica is a leading debt settlement company that offers assistance to individuals and families who are experiencing financial difficulties and hardship.

We specialize in negotiated debt settlement to assist clients by reducing debt balances while providing an affordable monthly payment.

Our professional and knowledgeable staff has helped thousands of consumers get back on their feet financially.