Posted by: Debt Relief : Category: 
by LSE Library
A recessed economy and bursting of the real estate bubble have pushed borrowers to the point where they can no longer keep up with payments on their credit cards and consumer debt. For those searching for solutions, the decision often comes down to choosing between a variety of debt relief options. The options include debt counseling, debt consolidation, bankruptcy, and debt settlement. Of the four, debt settlement and filing bankruptcy have become the most popular of the solutions due to their advantages relating to decreasing current payments and the reductions in outstanding balances of debt.
For consumers, the two most common filings are chapters 7 and 13. Of the two, chapter 7 allows for much better outcomes for filers with steep reductions or outright dismissals of debt. Prior to the overhaul of the bankruptcy code in 2005 chapter 7’s were immensely popular for just that reason. Since the overhaul, the choice of which of the two chapters would be available to the consumer is decided by the court depending on the outcome of a means test which is the required first step in any bankruptcy filing. The means test is essentially an evaluation of the filer’s income and expenses which is then set against debt redemption standards as set by the IRS. Measured against the IRS standards, if the borrower falls short of income guidelines he can then file for bankruptcy under the auspices of chapter 7. The guidelines for qualifying for chapter 7, however, are stringent. If the means test reveals that a borrower can pay even one hundred dollars per month toward debt, the filing will automatically go toward a chapter 13 bankruptcy. In either situation, the borrowers are required to get credit counseling and budget analysis at their own expense.
Chapter 13, while providing some relief on current payments, is not nearly as consumer friendly as chapter 7 and carries disadvantages that convince many borrowers that the option is just not for them. The biggest disadvantage is that once the terms of the filing are set, a borrower’s finances can be overseen by a trustee of the court. The invasiveness of having an outsider involved in day to day or monthly budgeting becomes an immediate deal killer and typically turns the borrower toward debt settlement.
Debt settlement, also known as debt negotiation, is a relatively new and aggressive form of debt relief offering many advantages over counseling, consolidation, and bankruptcy. The first and most immediate advantage is an approximate reduction of 50% on payments related to each account rolled into the debt settlement. Accounts which can be rolled into the settlement include credit cards, department store debt, unpaid utilities, medical bills, and other unsecured debt. Other advantages include:
* Being proactive in pursuing a debt settlement can prevent wage garnishments and attachments – Letting creditors know that you’re in a debt settlement process provides assurance they are going to be paid a least some of their money. Creditors are unlikely to initiate any legal action while a settlement is under way.
* Debt elimination – Outstanding balances can be reduced by 40 to 70%, depending on the creditor. On average, the collective accounts in a settlement will be reduced by 50%.
* Added security for secured assets – Reducing payments and eliminating a portion of unsecured debt relieves pressure on secured assets. Debt settlements, for example, are being combined with loan modifications to help homeowners reduce their total payments toward debt and improving the chances of getting approved for new mortgage terms.
* Complete payoff of debt balances – After the debt reduction, payoff schedules are flexible but generally last no longer than 48 months. The same accounts maintained with minimum payments could take over twenty five years to pay off.
* Faster improvement of credit scores – The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a credit report for ten years and stay on the public record indefinitely.
Debt settlement/negotiation is becoming increasing popular with struggling consumers because of its advantages over every other form of debt relief including bankruptcy. Consumers should still familiarize themselves with all forms of debt relief before making a decision. The best way to sort through the options is to work with an attorney with experience in all forms of debt relief to determine which will deliver the best outcome. Getting on the road to financial recovery is that simple.
Most debt consolidation companies do nothing better than simply ruin your fico score in order to settle your debt. If you really want to work with an agency that will help you reduce your debt, contact a company member of “CONSUMER CREDIT COUNSELING SERVICES” (CCCS) More info at: sccrealestateuncensored.com/2008/repair-credit-legally-remove-negative-accounts/ micasamidinero.com/2008/reparo-credito-eliminando-legalmente-cuentas-negativas/
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February 7th, 2009 at 6:06 am
@elohelreh AND below blanket SIFs are suuuper popular at end of month and during the current economic market. I’ve seen 30% approved regularly (depends on the creditor, of course) and some may accept lower if there is proper reasoning. DO YOUR OWN WORK and don’t let the DSCs waste your time and money.
February 7th, 2009 at 6:57 am
Collection law firms don’t usually report to credit bureaus. Their clients – the creditor – does. The only way the creditor knows anything about the account – outside of approving a below blanket SIF – is how the collections firm closes an account. If the firm uses a SIF close on their side, the creditor then reports to the bureaus as SIF (and likewise if the firm uses PIF, the bureaus receive PIF). On the whole DSC are such crap and waste of money. I love the advice Suze is giving in this!
February 7th, 2009 at 7:08 am
1) no upfront fees
2) no hidden charges
3) Canadians settle for a fraction of what you owe
4) Don’t do it on your own, let a professional do it so you get it done right, the first time
Learn the facts now: Canadadebtconsolidationnow (.)com
February 7th, 2009 at 7:58 am
Does anyone have experience dealing with any of these companies? We have right around 35k in, and need help soon. Thank you!
February 7th, 2009 at 8:12 am
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February 7th, 2009 at 8:35 am
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February 7th, 2009 at 9:16 am
i agree the video was ok to start with
February 7th, 2009 at 9:52 am
@NYBankruptcy
Nothing wrong with that because the point is to pay what you owe. It is not good to have bankruptcy on your credit report ever.
February 7th, 2009 at 10:22 am
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February 7th, 2009 at 11:21 am
This is what I find funny. Who has $7,000 and has past due debts. They don’t, otherwise they would pay their bills. People who are past due, typically suffered some loss of income or have poor money management skills and cannot save money on their own for their settlements. This is the main reason why debt settlement companies exist. Providing lower payments and saving money on the clients behalf, thus allowing the clients to be debt free in the near future.
February 7th, 2009 at 12:20 pm
i hate this bitch.
February 7th, 2009 at 1:15 pm
I went to CCCCS they were bullshit. I could do that with DAVE RAMSEYs program.. seriously they must pay Suze. I liked her better when she wasnt plugging everyone. some stuff she says is good then other things i am all like do what now??
February 7th, 2009 at 1:59 pm
well they have to get paid .. do you expect them to do it for FREEEEE?? but seriously If I can do this myself I sure as heck AINT gonna pay someone. yeah this is a good video.
February 7th, 2009 at 2:24 pm
Interesting video, however using the word “debt” doesnt seem appropriate. You created the money in the first place with your signature/pin. Try ask about their proof of claim for being the creditor.
February 7th, 2009 at 2:43 pm
what I am doing is changing my whole lifestyle and getting out of debt as fast as possible….paying 1 card down at a time…..I have two left and hope to be out in about 14 months.(: God is helping me along the way….! (:
February 7th, 2009 at 3:07 pm
Try debt management!
February 7th, 2009 at 3:54 pm
When u pay a collector, request that they delete the acct completely, not report it as “paid in full”. Reporting it as paid in full does nothing for ur score, u want it deleted.
February 7th, 2009 at 4:42 pm
There is no how reputable debt settlement company will ignore charges. They crop their interest from this. you can equally get this tips to get out of debt
February 7th, 2009 at 4:56 pm
people out there… blah blah …. now lets start to deal with my book sales… I HATE MY CREDIT CARDS and i can get you out of debt. and i have hooked up a lot of people. this TV personality will represent herself in court when she gets arrested for insider trading like Martha…
February 7th, 2009 at 5:10 pm
I found this site about getting out of debt: outofdebtstrategy.blogspot.com. It’s quite interesting. There are over 40 articles and every day new ones are added.
February 7th, 2009 at 5:39 pm
My husband lives in a seperate town due to working situation. My name is not on some of the credit cards, but I’m going to start attempting to settle the debts ourselves soon. Will they deal with me even though I’m not on some of the accounts?
February 7th, 2009 at 6:23 pm
outofdebtstrategy.blogspot.com/
February 7th, 2009 at 6:56 pm
CCCS is OK to a point. Let’s say that your total credit card bills per month is $1200.
CCCS comes back with a figure of $1100 a month. They are not getting the payments lowered but telling you in the future you are saving. But don’t you live for now rather then the future? It all does not make sense.
February 7th, 2009 at 7:38 pm
Yes I do..She seems proud of it..haha
February 7th, 2009 at 7:41 pm
@legalselfdefense I agree, it’s true, they want some money rather than nothing, as long as you are paying them they don’t care!