5 WAYS TO GET OUT OF DEBT:

There are only a handful of ways to effectively get out of debt; Debt Settlement may be the best option. Read below for the debt relief option that is best suited for you.

Debt Settlement:

Debt settlement is a legal and ethical way to become debt free, whereby a creditor and the consumer come to a legal agreement to reduce the amount of the original debt. This process is a viable option for the consumer looking to avoid Bankruptcy. Many consumers feel morally or ethically obligated to at least pay some of what they owe as opposed to filing for Bankruptcy and not paying anything. Often consumers feel better and more liberated by paying down their debt to the best of their ability and giving the creditor something back.

Unlike debt consolidation or credit counseling programs, at ACI we do NOT make monthly payments to your creditors. Instead, you deposit funds each month that accrue in a Trust account and ACI will negotiate the unsecured debt on your behalf. The ultimate goal of a debt settlement program is to see you debt-free in 12 to 36 months* at a rate of savings from 40-55%* of what was owed. While debt settlement does impact your credit, typically consumers looking to enroll in a debt settlement program are already delinquent and subsequently have a lower credit score. The good news is that debt settlement impacts your credit for a much shorter time frame than debt consolidation, credit counseling or Bankruptcy, which can remain on your credit report for 7-10 years.

In our debt settlement program, the consumer will see an instant and significant reduction in their monthly payments. Debt settlement is an excellent debt relief solution for consumers who are in serious credit card debt, usually greater than $10,000, and are struggling to make the minimum monthly payment or have already fallen behind.

There are several reasons to consider Debt Settlement. You may be trapped in a consolidation plan and are not seeing any tangible results, or suffering from one of the many “pink slips” or lay-offs that are placing Americans in one of the highest unemployment rates in the last 26 years. This trend has the average consumer sinking further and further into debt. It is also possible that you have considered Bankruptcy as the only option remaining but have been advised by an attorney that you do “not qualify” based on your income. Debt Settlement is a viable option for the consumer who may not qualify for bankruptcy or who may not want to file for bankruptcy.

Consumer Credit Counseling

Consumer Credit Counseling, also known as “CCC,” was enacted by creditors to work for creditors. With credit counseling, a third party “counselor” sets up monthly payment arrangements with the credit card companies at a lower interest rate than what you currently have. Typically, a consumer can be debt free in 5 to 6 years and able to save some money, but mostly on their high interest credit cards. Keep in mind that these companies work for the Creditor and not you. Credit counseling agencies are paid by the creditors based on what they can get you to pay. The more you pay to the creditor, the more they make. Additionally, when working with one of these companies, any debt that they help you with will show as Third Party Assistance on your credit report, which can be as negative on your credit as Bankruptcy.

Debt Consolidation

Debt Consolidation involves applying for and qualifying for a low interest rate loan designed to pay off all of your credit cards in full. The idea is that if you are paying an average of 18% across the board on all your credit card debt, by consolidating those debts into one loan at a lower interest rate, you will save money. While the concept is accurate, due to the extreme credit crunch we are suffering, banks are not apt to loan money out any longer and it is more difficult than ever to obtain one of these loans; not to mention you might not receive a favorable interest rate or affordable monthly payment. 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. The repayment of the loan can take anywhere from 5 to 7 years to complete.

Bankruptcy

This is a “fresh start” for the consumer, but is often looked at as a last resort because of the severe credit implications and the arduous process that debtors now need to undergo. 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 option. In a Chapter 7 bankruptcy, according to the 2005 Bankruptcy Reform Act, consumers no longer can eliminate large debts without first qualifying through a “Means Test” to determine their ability to repay the debts. Additionally, debtors are required to take accredited and approved financial counseling courses. If you median income is over the amount allotted, you will be forced into a Chapter 13 reorganization where you will be forced to repay the majority of your credit card debt, in certain cases over a duration of 36-60 months. A debtor will generally be forced to liquidate all non-exempt assets of value and pay any creditors with the money from the sale in a Chapter 7 case. If Bankruptcy is an option you would rather explore first, we can refer you to a local Bankruptcy Attorney for a Free Consultation.

Minimum Payments

If you pay only the minimum payment on your credit card each month it could easily take you decades to pay the debt off and cost you an unsettling amount of money due to interest. Currently, the national average of debt is approximately $22,000 per household. If you fall into this category and you continue making your minimum payments at a 19% interest rate and at a 2.1% minimum payment, it would take you more than 54 years to pay off the debt and your total payoff would be substantial – $82,101.91 of which $60,101.71 would be in interest alone. This is how the credit card company’s make their money and the reason why it is a multi-billion dollar a year industry.

If you do not do anything at all then you are setting yourself up for potentially a bigger fall than the minimum payment route. Problems do not go away by ignoring them, conversely they usually are exacerbated. You may do nothing, but your creditors are afforded the right to legally collect on your debt and they will go to the legal limits to do so. This will most likely result in lawsuits, repossession, and an unnecessary amount of stress on you, your relationships, your employment and your family.