Debt Relief Options

We believe that our safe, conservative debt settlement programs are the best options for many Americans seeking debt relief. However, alternatives do exist and listed below are brief summaries of these options. We encourage you to contact our knowledgeable Debt Advisors to discuss your options.

Consumer Credit Counseling

A Consumer Credit Counseling service creates a repayment plan requiring the consumer to remit the full amount owed over the course of 4 to 5 years via monthly payments to the service – often at a lower interest rate. The service manages all of the consumer’s accounts and makes the appropriate payments each month.

Advantages

• Consumers with many payments have them reduced to a single monthly payment.
• Often there is a lower monthly interest rate attached to the monthly payment.
• Unsecured debts can be paid off in 4 to 5 years.

Disadvantages

• The reduction in monthly payment amounts is typically nominal, offering little or no relief to the consumer.
• The lack of significant reduction in the monthly amount owed causes many consumers to drop out of credit counseling service before they complete the program.
• Credit counseling will typically take 2+ years longer than a debt settlement program to complete
• The client may be required to sign an agreement preventing them from applying for additional credit.

Mortgage Refinancing/Home Equity Loan

A home equity loan is a loan that is secured against the value of your property. Loan terms are fixed and you must make monthly payments until the agreement comes to term.

Advantages

• A single payment is sometimes easier to manage than multiple payments.
• Home equity loans provide a low interest method of borrowing money.

Disadvantages

• Unsecured debt becomes secured debt and delinquency may result in foreclosure and the loss of the client’s home.
• Existing bad credit will make it difficult to obtain a home equity loan.
• If the client has little or no equity in their property they may not be able to borrow an amount large enough to make an impact on their unsecured debt. They could risk liquidating their equity in order to pay interest charges or late fees.
• The monthly payment will likely be higher than a debt settlement program.

Unsecured Debt Consolidation Loan

A debt consolidation loan repays your unsecured debts while you make new monthly payments to a third-party creditor.

Advantages

• A single payment is easier to manage for some than multiple payments.

Disadvantages

• Unsecured loans, especially debt consolidation loans, typically carry very high interest rates.
• A poor credit rating will make it difficult to qualify for a loan.
• Short-term loans have high monthly payments and most likely a longer repayment term than a debt settlement program.

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy is an action by a court of law that will erase all debts. However, Chapter 7 requires relinquishing all non-exempt property to the court to be sold in order to pay down some of the debt.

Advantages

• Collection calls and letters will stop once Chapter 7 Bankruptcy is filed.
• Gives consumers a fresh start.
• Can prevent wages from being garnished.
• If tangible assets are minimal or nonexistent, the cost of getting rid of debt is very small.

Disadvantages

• Recent changes in the law has eliminated the Chapter 7 option for many consumers.
• Chapter 7 Bankruptcy can adversely affect credit ratings for 10 years and remains filed with the court for as many as 20 years.
• Many employers have the right to deny employment to those who have previously filed bankruptcy.
• In today’s society there is an adverse stigma that accompanies filing bankruptcy.
• Money owed to government agencies (e.g. back taxes, student loans) usually will not be erased.

Chapter 13 Bankruptcy

Another bankruptcy option is Chapter 13 Bankruptcy. By filing Chapter 13, a court of law will determine a monthly expenditure limit and based on the limit, will set a repayment plan.

Advantages

• Enables filers to catch up with missed mortgage payments over 5 years.
• Collection calls and communication will stop once bankruptcy is filed.
• For some, one monthly repayment is easier to manage than several.

Disadvantages

• Chapter 13 Bankruptcy can adversely effect credit ratings for 7 years and remains filed with the court for as many as 20 years.
• Many employers have the right to deny employment to those who have previously filed bankruptcy.
• The court basically runs your life for a very long time
• Chapter 13 Bankruptcy requires a large percentage of outstanding debt to be repaid.
• The court garnishes all exposable income for the duration of the 5 year payment plan resulting in more than half of all Chapter 13 Bankruptcies being canceled before their term.

Opening Additional Lines of Credit

The current credit crunch all but eliminates this option. Even if a larger line of credit could be obtained, interest rates are remaining exceptionally high causing many consumers to devote a large portion of their monthly wages to cover the interest alone.

Advantages

• If payments are made on time, the consumer’s payment history remains in good standing.
• Affords an extended period of time to research debt reduction or settlement options.

Disadvantages

• Compounds – not solves – the original problem.
• Interest rates can increase to as much as 29% or even higher if a single payment is late or missed.
• Can drastically increase the total amount of debt, total monthly minimum, and the amount spent each year on interest.