The Current Financial Crisis Impact on Debt Settlement
Hello, America. It seems our excess has finally caught up with us. It’s not surprising that this would eventually happen. When an economy is constructed not on value, but on debt; it is virtually inevitable.
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Creating a Household Budget
One of the key elements of a debt settlement program is helping you gain control of your household income. If you expect to be truly debt-free, gaining and maintaining control of your income and how you spend it must be your top priority.
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Living Within Your Budget
So now you have created your household budget. Congratulations! But now how do you make sure you can stick with it? With the financial pressures of today, how do you ensure that you can live within your budget each month?
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If you are only making minimum payments on $20,000 in credit card debt, at a 18.9% interest rate, it can take you over 50 years to pay it off and you could pay over $50,000 in interest.

You may be surprised to learn that credit card debt grows back 78% of the time after taking out a debt consolidation loan. Without a fundamental change in the spending habits of the consumer, a loan usually only makes things worse.

Debt Relief Information: Debt Settlement, Credit Counseling, Debt Consolidation Program, and Bankruptcy.

Debt settlement involves negotiating with the credit card companies to reduce the total amount of debt that you owe. Debt settlement is a fairly aggressive approach to credit card debt relief, with some of the advantages being that most consumers are able to significantly lower the amount they owe and, instead of taking up to 20 years or more to pay off the balance, a more aggressive debt counseling program can have them debt free in 12 to 36 months. A debt settlement client will immediately notice a substantial reduction in their monthly payments compared to what their minimum monthly (usually interest only) payment was with the credit card companies. Debt settlement is an excellent debt relief solution for consumers who are in serious credit card debt (usually greater than $10K) and are unable or only able to make the minimum monthly payment and/or have already fallen behind.

Credit counseling involves working with the credit card companies to lower the interest being charged. With consumer credit counseling services a consumer can be debt free in 4 to 5 years and able to save some money on their high interest credit cards. Realize, however, that these companies are usually set up by the credit card companies in order to collect as much of the debt as possible. Don't be fooled by their non-profit status... all the profit they make beyond their operating expenses goes back to the credit card company. Also, when working with one of these companies, any debt that they help you with will show as TPA (third party assistance) on your credit report. In some instances, the strategies can be just as bad for your credit score and rating as a bankruptcy!

A Debt Consolidation program involves taking out one loan to pay off multiple debts. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of simply making one payment instead of many, although usually for a much longer period of time. A consolidation program can severely affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed very carefully. Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments.

Chapter 7 bankruptcy is considered a last resort for debt relief by most because of the usually severe credit implications. For consumers who owe a lot of money on their credit cards and do not have an adequate income stream, this may seem like the only debt relief alternative. In a Chapter 7 bankruptcy, a debtor will generally be forced to liquidate all non-exempt assets of value and pay the creditor with the money from the sale. Most consumers who file chapter 7 bankruptcy will advise you that the long term damage just isn’t worth it.

Do nothing, is exactly as it sounds. Unfortunately even if you are doing nothing, your creditors will definitely not do the same. This will most likely result in lawsuits, repossession, and a lot of stress. Ignoring your debts will never make them disappear, but it will most certainly cause you more grief and stress in the short and long run.