Debt Relief can be defined as the reduction of some or all of the debts owed, or limiting the growth or preventing the accumulation of new debt.  Although generally this applies widely, in this context it is better defined as a reduction program on unsecured lines of credit.


 

What Are Your Debt Relief Options?

There are various programs that exist designed to help the individual cope with large amounts of unsecured debt.  The most common debt relief programs are as follows…

  1. Debt Settlement
  2. Debt Elimination
  3. Debt Management
  4. Consolidation Loans
  5. Credit Counseling

 

Debt Settlement

If you have large amounts of credit card debt, medical bills and other lines of unsecured debt, debt settlement may be a viable option.  Debt Settlement is also commonly referred to as debt negotiation and is designed to reduce the payback period and amount of debt owed to creditors.  Those who qualify for a debt settlement program can expect to settle debts for 60% or less of the total amount owed.  If a creditor agrees to a settled amount, they are legally forgiving the remaining debt.  Additionally, because compound interest is halted, the length of payback time is shortened drastically.  In many cases the debtor can be free in 2-3 years.

Debts can be settled by anyone, however many individuals, couples and businesses choose to hire a professional to handle the negotiation process.  Hiring a law firm that specializes in debt relief brings expertise, time savings, typically a better negotiation and a professional representation.  Professional debt settlement programs will vary slightly depending on each case, however every one has the same basic steps.

 

The Basic Steps in a Professional Debt Settlement Program…
  1. The debtor stops paying creditors, and starts contributing to an FDIC insured trust account.
  2. Representation letters are sent to creditors announcing debtors participation in professional program
  3. Collection calls and letters are handled by the law firm and debt settlement representatives.
  4. Negotiation of debt begins when program begins and continues on an account by account basis.
  5. Program is completed when enough money is accrued in trust to settle all debts plus pay program fees

 

What Can be Expected From a Debt Settlement Program?

Participants in a professional debt settlement program can expect to have debt collection efforts slow or stop within the first month of being enrolled in the program.  When the program is completed clients can also expect to have paid only 40%-60% of amount owed, however in some cases they may pay as low as 20%. Program fees can range from 5%-15% depending on the firm as well as trust fees along with potential trust account fees.  The FTC passed an amendment to telemarketing sales rules prohibiting debt relief companies from charging fees before at least one of the consumer’s debts are settled.  The FTC File No. R411001 went into force on October 27th, 2010.

If you are currently enrolled in a Debt Settlement program that does not meet the guidelines listed above or is not giving you the results that you desire, CONTACT US for help and more information.


 

Debt Management

The typical debt management organization will advise their clients to close their credit card accounts and instead pay a single payment directly to the debt management program. The advantages are that the debt management company takes care of paying each credit card and negotiates the interest rate to shorten the length of time the client is in debt. This type of program will typically take longer than a debt settlement program because it still requires paying debts in full with interest.

Limitations of Debt Management:

Most of these companies are established and funded by lenders in order to help collect as much debt from a client as possible. Non-profit organizations have been scrutinized for funneling operating expenses back to the original creditor. Also, these companies will report third party assistance (TPA) on your credit report which can be as damaging as bankruptcy.


 

CLICK HERE to read about Debt Elimination, Consolidation Loans, & Credit Counseling

 

If you would like to speak with one of our specialists about enrolling in a particular program, or just need some help deciding which solution is right for you, feel free to call us at (888) 609-1854 | Opt. #1 or complete the form on our CONTACT page.