Answers to Common Questions
How to Get Help For Unmanageable Debts
Avoid Debt Relief Scams
About Debt Relief Programs
How Do Debt Relief Programs Work?
Which Debts May Qualify for Relief?
About Do-It-Yourself Debt Relief
What About Debt Consolidation Loans?
What About Payday Loans?
About the Fees for Debt Relief Services
About Debt Relief and Credit
What is the Consumer's Responsibility?
How to Get Help For Unmanageable Debts
If you are faced with debts that are unmanageable, it is important to know the options for taking control of your debts and financial future. You have several options: The first option to consider is to take control of debts on your own - by budgeting, cutting back on expenses and paying down your existing debt balances as quickly as possible.
One proven and popular option is the "Debt Snowball" - a plan that requires paying at least the minimum on all your credit cards EXCEPT for the lowest balance debt - and for that lowest balance debt, apply as much as you possibly can each month until that debt is eliminated. Celebrate that victory, then move on to the attack the next lowest balance debt until all debts are resolved.
Another option for consumers is to negotiate directly with creditors on your own. This requires consumers to call up creditors one by one to request lower interest rates, an adjustment of payment terms or due dates (to avoid penalties), or even offer to settle debt for less than the full amount owed.
Finally, for many consumers, a structured debt relief or debt hardship program coordinated by debt providers may be the answer. Debt consolidation programs or debt resolution programs can help consumers combine all qualifying unsecured debts into a single, lower payment each month. It is important to understand that typically ONLY unsecured debts are eligible for relief. These include credit cards, store cards, medical bills, collection debt, and other debt NOT secured by collateral, such as a home or car. Consumers can find out which debts qualify for relief and receive a free debt relief evaluation and savings estimate here.
While these programs don't make debts "magically" go away - they can help to lower monthly payments, save money and help consumers get out of debt faster. Debt relief or debt hardship programs coordinated by debt relief counselor or debt relief providers, if followed diligently, can be a viable alternative to bankruptcy, which has a more serious and long-lasting impact on credit.
Avoid Debt Relief Scams
While there are proven debt relief programs to help consumers get out of debt - NO debt relief program makes debts "magically go away." Consumers are strongly advised to avoid those companies that make claims such as "get out of debt for pennies on the dollar" or similar promises.
Consumers should always check on a debt provider's track record as well as BBB rating before committing to any program. And, it's important to know that unless debt relief services are "attorney-based" NO upfront fees may be charged. In fact, NO fees may be charged for debt resolution UNTIL debt has been successfully reduced or resolved.
In addition, while reputable debt relief providers will always conduct a free budget and debt analysis for consumers prior to recommending any plan or course of action, it is still the CONSUMER'S RESPONSIBILITY to follow the plan with consistency and diligence -- setting aside the required funds each month in order to pay down or resolve debts.
Finally, it is also the consumer's responsibility to do everything possible to avoid taking on ADDITIONAL DEBT in order to achieve success with any debt resolution program.
Debt relief programs are designed to help provide relief for "unsecured debts" - such as credit cards, store cards, gas cards, medical bills, and other debts not backed by a personal asset or collateral. This means that home mortgages or auto loans are not included in typical debt relief programs.
About Debt Relief Programs
Debt relief programs are NOT intended as a way for individuals and families to "walk away" from debts or the terms of their agreement with creditors. We believe that every person should be responsible for his or her debts and make their best good faith efforts to pay off debts according to the terms of their agreement.
However, there are situations where individuals and families who've paid their debts on time for years suddenly find themselves experiencing a personal or family emergency or hardship - such as a loss of job, reduction in income, medical bills, or other unsecured debts that become unmanageable.
When this occurs, debt hardship relief programs may be an honorable way out of debt for individuals and families without taking on a costly loan or filing for bankruptcy.
How Do Debt Relief Programs Work?
Typically, debt relief providers must be accredited and licensed by individual states and are designed to help consumers combine multiple high interest debts into one lower, more manageable payment each month. Debt relief programs are personalized to help individuals and families burdened by debts get out of debt as quickly as possible by reducing interest rates, lowering payments, or settling debt for less than the full balance.
For many people with serious debts, bankruptcy may be the best option. However, structured debt relief programs may be able to help individuals and families get out of debt - without bankruptcy or taking out a costly high-interest loan.
Which Debts May Qualify for The Benefits of Relief?
Debts that may qualify for debt relief programs are credit cards, store cards, gas cards, medical debt, unsecured personal loan debt, and other debts considered "unsecured debts" because they are not backed by collateral. Some common debts that DO NOT qualify for debt programs are home loans and auto loans.
About Do-It-Yourself Debt Relief
Everything that debt relief programs do, it is possible to achieve on your own - IF you are determined and committed to maintaining a budget, living within that budget, AND saving for unexpected expenses. To help with budgeting and good spending habits, there are structured "get-out-of-debt" programs offered by nationally recognized experts such as Dave Ramsey, Suze Orman, and others that have been proven successful for many people across the country.
In addition, if high-interest credit cards and other debts become overwhelming and unmanageable - consumers have the right to contact creditors and request lower interest rates, a waiving of late fees and penalties - or even to settle debt for less than the full amount.
For consumers who are persistent and want to negotiate with credit card companies and other creditors on their own, this may be the best solution. However, many consumers may prefer to utilize the services of non-profit or experienced debt relief specialists who can negotiate the benefits of debt relief on behalf of consumers.
What About Debt Consolidation Loans?
For some consumers with good credit, a low-interest debt consolidation loan may be a good way to get out of debt by combining or "consolidating" multiple high-interest debts into a single, lower-interest payment each month. However, consumers should recognize debt consolidation loans typically require collateral (such as a home or other asset). This means, if you default on the terms of a consolidation loan, you could risk putting your home or other asset at risk.
What About Payday Loans?
AVOID Payday Loans! For individuals and families struggling paycheck to paycheck, a payday loan might seem to be a way to provide some immediate relief. However, relying on payday loans, which charge VERY high interest rates, can lead to a cycle of debt that is very difficult to escape.
About the Fees for Debt Relief Services
It's important to understand that all initial debt relief evaluations are offered free to consumers at no obligation. A free debt relief analysis will give debt counselors the opportunity to conduct a free budget and debt evaluation to find out the amount of debts the consumer is facing as well as how much income the consumer has each month to help in paying down debts.
If it is determined that consumers are facing a personal or family hardship and have an unmanageable level of debt, a debt relief program may be appropriate to help resolve debts.
Regarding fees for debt programs, no upfront fees may be charged for debt relief services unless services are "attorney-based" (provided by an attorney). Fees may only be charged after debts are successfully reduced or settled. This is as a result of new debt relief regulations that took effect in 2010 to protect consumers. Prior to enrolling in any debt relief program, consumers should be clearly informed and understand any applicable monthly fees for debt management programs or percentage-of-settlement fees that may apply for debt settlement programs as a result of successful settlements negotiated on behalf of consumers. Consumers should also understand that money saved as a result of a successful settlement is subject to taxation.
About Debt Relief and Credit
Should you decide to enroll in a debt relief program, it is important to understand how debt relief programs could impact credit. In the case of a debt management program (DMP) coordinated by credit counselors, enrollment may be "noted" on the consumer's credit report - but it is not necessarily harmful to credit. However, debt settlement programs typically will have a negative impact on credit as consumers fall behind on monthly payments prior to making offers to settle balances with individual creditors. While consumer debt hardship programs can have a negative impact on credit, the impact is typically not as severe or long lasting as bankruptcy. Finally, consumers should understand that one of the main factors affecting credit scores is the percentage of available credit being used. Using almost all available credit will typically cause credit scores to decline. So, improving your "debt-to-available-credit" ratio by reducing debts is a very important step to building or re-building a strong credit score.
What Is the Consumer's Responsibility?
If consumers choose to take advantage of the benefits of debt relief offered by a debt relief provider - it is important to understand that debt relief programs do not make debts magically "go away". To be successful in a debt relief program, consumers must have the commitment and discipline to set aside the necessary funds each month to complete the program in order to get out of debt as quickly as possible.
