Too much debt, not enough money!  What can I do?

First, you need to find out exactly how much money you have coming in and how much is going out each month. 

Most people really don’t have a budget to keep track of their finances.

When you know exactly how much money you have (or how little), then and only then, can you decide which solution would be best for you.

OK, you need $500 just to make the minimum payments on your credit cards, but only have $350 or so after all other bills are paid. 

Does it really make  sense  to continue making the minimum payments required by each of your creditors?

Consumers do not understand that the Credit Card Industry does not want, nor expect you to ever fully repay your accounts! Billions of dollars of interest and fees are earned from people just like you, who only pay the minimum payment each month.

It is estimated that in takes the average consumer 15-20 years to repay a single account at a cost of 3-4 times the total amount charged! There’s got to be a better solution, and there is.

Debt Management (sometimes called Credit Counseling) programs? How do they work?

Most unsecured creditors will participate in a Debt Management Program (DMP). To determine if you qualify, information about your accounts will be entered into a national data base. 

You will need:

• Name of the creditor
• Account number
• Current Balance
• Interest Rate
• Payment

If you qualify you will have:

• One monthly payment disbursed to each of your creditors according to the accepted proposal.
• Lower over-all interest and fees allowing you to pay off these accounts in 48 months or so saving you thousands of dollars in interest and fees.

Although your credit score may decline slightly while you are in the program, once you have completed the program your scores will improve. For more information, visit www.myfico.com

No creditors are calling as they are receiving monthly payments according to the program.

But what  if after  completing the Household Budget Worksheet and examining the Debt Management Program you simply do not have enough left over at the end of the month?

Then, a Debt Settlement Program (DSP) may be your best solution.

Debt Settlement is a program designed for those  who are…

• Facing severe financial hardship due to circumstances beyond their control (loss or lower income due to unemployment, lay-offs, divorce, disability, insufficient retirement income, etc.)
• Have considered a Debt Management Program (above), but simply cannot qualify or afford the monthly payment required.
• Do not want to file for bankruptcy at this time.

How does a Debt Settlement Program work?

If you have fallen behind in making your minimum payments (or are about to), rather than continuing make payments, you will deposit an amount you can afford into a savings account or into an account set up by a qualified Debt Settlement Company. 

Once there is sufficient funds to make a settlement offer, the creditor is contacted and a settlement is negotiated.

Most creditors will accept a settlement, but there are some cases where a creditor may attempt to seek legal action in order to collect the full balance.

But, successful settlements can still be made in spite of a judgment, as creditors would rather accept a settlement offer than force you to consider bankruptcy.

For those of you who are self-employed, retired and/or receiving Social Security and/or Disability benefits or income from a pension or retirement plan, then you are most likely exempt from any legal action from a creditor.

Once you or a professional negotiator has arranged a settlement, the account is now listed on your credit report as “paid-as-agreed” or "settled-as-agreed" with a zero balance.

Debt Settlement can be a time-consuming venture and you may not get as good of a settlement as a professional debt settlement company.

It might be in your best interest to request a FREE Analysis from a qualified company.

Photo by Caston Corporate

I'm 68, retired, living on disability income only.  Can a creditor garnish for failure to pay my unsecured credit card?

I've written about how abusive debt collectors can be, and have offered advice on how to deal with them in previous blogs.

But today, I want to zero in on an actual situation we dealt with recently.

A client of ours is 68 years old, retired, and living on disability income only.  He rents and must spend a large amount of money each month on medicine and medical treatment for his disability.

In order to make ends meet, he has had to use his credit cards as so many people have done and continue to do today!  Let's not get into whether he should or shouldn't have, it is what it is.

One of his creditors called. After using several intimidation tactics,the collection agent told him that if he did not set up a repayment agreement, they would take him to court and sue him. So he agreed to a repayment plan of the entire amount even though he could not afford it!

He contacted us after the agreement was made and we explained to him that even though the creditor has a right to be paid and could choose to file a claim in order to be awarded a default judgment, they could not touch his disability income.

According to the Federal Trade Commission certain wages are EXEMPT from garnishment:

Can federal benefits be garnished?

Many federal benefits are exempt from garnishment, including:

• Social Security Benefits
• Supplemental Security Income (SSI) Benefits
• Veterans’ Benefits
• Civil Service and Federal Retirement and Disability Benefits
• Service Members’ Pay
• Military Annuities and Survivors’ Benefits
• Student Assistance
• Railroad Retirement Benefits
• Merchant Seamen Wages
• Longshoremen’s and Harbor Workers’ Death and Disability Benefits
• Foreign Service Retirement and Disability Benefits
• Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
• Federal Emergency Management Agency Federal Disaster Assistance

But federal benefits may be garnished under certain circumstances, including to pay delinquent taxes, alimony, child support, or student loans.

This also applies to funds in your bank account.

But be careful here!

If you co-mingle funds, meaning you earn a little extra income in addition to your disability income, DO NOT PUT THOSE FUNDS IN THE SAME CHECKING OR SAVINGS ACCOUNT!

You should open a 2nd account for that extra income (and keep the balance very, very low!)

After explaining this (again) to our client, we have helped stop the agreement.

DON'T BE INTIMIDATED!  If you are, perhaps you should seek the professional help of a debt management company.

Photo by Caston Corporate

Just the sound of the word...BANKRUPCY sounds scary, doesn't it?

If you find yourself overwhelmed by too much debt, don't think that bankruptcy is your only choice. 

Millions of people just like you have resolved their debt problem by using alternative methods.

The worse mistake you can make is to DO NOTHING.  If you cannot afford to make the minimum payments due on your credit cards or other unsecured debt, don't put you head in the sand but start to take action.

Call your creditor before the due date of your payment.  You may be able to work out a temporary plan whereby you pay little or nothing for a few months or until you get yourself back on track.

However, don't be surprised to learn that even though you have been a good customer for many years and have never or rarely been late or missed a payment, they refuse to help you.

You'll soon find out that the credit card and banking industry is in business for one reason and one reason only...PROFIT!

Never forget that they DO NOT CARE:

• That you've lost your job
• That you have a family to take care of
• That you've had a serious illness
• That you've gone through a nasty divorce

GET THE PICUTRE! THEY DON'T CARE!

So what can you do?

You should contact a Debt Management Company to see if you can qualify for a Debt Management Program (DMP). If you do, then your interest rates and fees will be greatly reduced and your single payment may be a little less that the total of your current minumum payments due.

If you can't afford the DMP, then you should consider a Settlement Program. 

Once your accounts are delinquent for 120-180 days, the creditor may be willing to accept a settlement offer at about 50% or so if you have that much to make in lump sum.

Of course, for most people, if they had that kind of money, they would be behind in the first place!

You may try to arrange a term-payment settlement, but you may not get as good a deal if it takes 6 months or so to complete.

The main problems with do-it-yourself debt settlement is:

• You will be dealing with professional debt collectors that are trained to intimidate you into sending them as much money as possible.  Be very careful!
• The debt settlement process takes many hours and for most people (who have a job and or family), they just cannot spend that kind of time.

You may want to seek the help of a professional debt settlement company that has the experience to help you.

The point is, there are alternatives to bankruptcy and you should explore them first.

Is the anything you can do to stop wage garnishment?

You pick up your paycheck and notice that money has been withheld due to a wage garnishment.

When a creditor files a claim on an unpaid account, a summons will be delivered to you.

If you ignore it, in about 30 days, a default judgment will be awarded the creditor/plaintiff.

Again, if you do nothing about it, then the creditor may decide to apply for a writ of garnishment.  This is presented to your employer, and depending on which state you live in, you will most likely have 25% of your net check sent to the creditor. 

Your employer has no choice but to honor the writ of garnishment.

SO NOW WHAT?  You have a few options:

If you have any access to a lump sum of about 40%-50% of the total due, then you can contact the original collection agency or attorney for the plaintiff and negotiate a lump sum settlement.

If you don't have a lump sum, then your only option is to present a plan to repay your debt instead of them garnishing your wages. 

Example: 

• Let's say you owe $5,000.
• Your take-home wage averages about $1300, every two weeks.

The wage garnishment allows the plaintiff to garnish 25% or $325 every pay check or $650/month! 

For most people, this would cause them to be unable to pay the mortgage or rent, utilities, food, etc. and ultimately, your only recourse would be to file for bankruptcy protection. 

Before you contact the attorney for the plaintiff or the creditor directly, you need to have a couple of things ready:

A complete basic budget showing all income and outgo each month. Make sure to list everything and be honest.  Let's say you have $100 left over each month (if you're lucky).

It may be helpful to write a brief hardship statement explain why and how you got into this situation. 

• Now call the creditor/attorney and explain your situation. 
• Offer to pay $100/month until the amount is repaid.  Ask them to charge 0% interest.  They may or may not, but they have an option to charge 0% - whatever your state allows in an agreement like this.
• Offer to fax the budget, hardship statement and a copy of your latest pay stub. 

In most cases, they will agree.  If not, explain that if they refuse the offer (don't be ugly here!) then you have no choice but to seek bankruptcy protection as you cannot pay your bills if the wage garnishment continues.

If they agree, MAKE SURE TO GET THE AGREEMENT IN WRITING!

Do not agree to any check-by-phone or any other payment arrangement without the written agreement.

Hope this helps!

Photo By: ladybeames'

Too much debt? You may need debt settlement help.

You've done your best to keep up with all of the credit card or unsecured debt you have, but there is just no way to keep up with the payments any longer.

After responding to an ad on TV, you find out that you cannot qualify for a Debt Management Program because the monthly payment is too large.

Rather than filing for bankruptcy, you may want to consider debt settlement help.

Debt Settlement is a program designed for those who are:

Facing severe financial hardship due to circumstances beyond their control.  Unemployment, rising cost of living to those on a fixed budget, divorce, disability...situations that can happen to anyone.

After your accounts have been past due for 120-180 days, most creditors will consider a settlement on the account.

In fact, you may receive a letter or statement offering a 75% settlement if you can send the entire amount by the end of the month. Of course, if you had that kind of money, you probably would not behind in the first place.  What can you do?

If you have 40%-50% that could be paid in a lump sum (most likely, you don't), then play hard-ball and offer 40%.  If you have a lump sum, you should be able to get the account settled for a much lower amount that 75%.

If you do not have the lump sum needed, then counter with a term-payment settlement of what your budget will allow.

Here's an example:

You have a credit card with a balance of $8,000.  It has been charged off and is with XYZ Collections.  

You don't have $4,000 (50%), but you could put $1,000 down and then make $300/month payments on the balance of $3000, for 10 months.

The agent will most likely say that they cannot go beyond 3 or 6 months.

Tell them you have no more funds and if the offer is rejected, then you would most likely have to file for bankruptcy protection.

If the answer is still no, then hang up.  You may get a call right away with a counter.  If you do...Hold firm!

Wait about 3-4 days (ignoring their calls) and then call back and hold firm with your offer.  You may have to give a little (12 months of $300 instead of 10 for a total of $4600 total), but you still have a decent settlement.

If the agent agrees, GET THE AGREEMENT IN WRITING! Never send or authorize a settlement payment without having the written agreement in hand!

Finally, don't be late on your payments!  There will be a phrase in the settlement agreement stating that any missed or late payments will VOID the agreement.

As you can see, it is possible to settle debts with your creditors on your own.  However, if you are uncomfortable with this proccess, there are Debt Settlement companies out there to do it for you.  Since you will have to pay a fee for their services, it may cost you a little bit more.  However, you will still save thousands and have an experienced debt settlment professional doing the negotiating for you.  Either way, Debt Settlement is a great option!

You are late or behind on your credit card payments.  The agent calls and tells you about Hardship Plans.  Is this a good deal?

Never forget that the goal of the credit card industry is to make money...lots of money!

They don't care...                    

• about you
• your family
• if you lost your job
• have had major illness

So when they offer a hardship plan, remember the saying,

If it sounds too good to be true, it probably is.

A typical hardship plan will waive or reduce interest rates and fees fo 6 months or so.  The pitch is that this will give you a little breathing room and you can renegotiate your payments or plan later.

• They will want you to set up automatic deductions from your bank account or send them 6 months of post dated checks.  Doesn't sound too secure, does it?

OK, so maybe you agree.  Let's examine the plan.

• Your balance is $5000. 
• You current minimum monthly payment is $150 or so. 
• They offer you payments of $100/month for 6 months at a reduced rate of 6% and no fees.

After six months:

• you've paid $600
• $144 went to interest 
• $456 went to reducing the principle 
• your balance is $45444

Now it is time to renogiate your plan.  More often than not, you'll be back to high interest rates and fees which means it will take you several years and thousands of dollars in interest to pay off your card.

Some plan!

Finding debt relief solutions is not easy,  but not impossible.

Before we discuss various options to eliminate debt, it may be helpful to examine why you have too much debt.

Most consumers fall prey to the credit card industries tricks to charge outrageous interest rates and fees for the use of their cards. 

They make offers such as:

• 0% interest
• No interest for 6 months
• Earn $$$ every time you use your card
• Double flier miles with each purchase
• No payments until…

But before long, you realize that the easy-to-make, minimum monthly payment is not even reducing the balance!  In fact, in many cases, after you make your minimum payment, your balance may actually increase.

What can you do?

Cut up all of your credit cards!  If you are serious about eliminating credit card debt, you have to stop the main problem…easy credit!

Determine what it would take to pay your credit card debt off in 12-24 months.  You can find several debt calculators online.

You will be amazed at how quickly you can pay off your card(s) and how much you will save just by adding an extra $25-$50 each month.

If you are in such a financial hardship that you can barely afford the minimum payment, and there is no way you could afford any more, then you should consider a Debt Management or Debt Settlement Program. 

Photo by Kory Hodek

        Debt Consolidation

                    vs.

          DebtSettlement 

It is very important to know exactly how much money you have coming in and how much is going out each month before you decide if a Debt Consolidation or Debt Settlement Program is best for you. A basic home budget does not have to be complicated.  You just need to know:

1. How much money (from all sources) do you have after all deductions?
2. How much money do you spend each month? Things like the mortgage or rent, utilities, groceries, auto payments, insurance, etc.  Be sure to write down everything. 

When you know exactly how much money you have (or how little) after paying all of your bills, then we help you decide which program would be best for you. 

Now that you know where you stand financially, does it really make sense to continue making just the minimum payments required by each of your creditors? 

The Credit Card Industry does not want, nor expect you to ever fully repay your accounts! Billions of dollars of interest and fees are earned from the millions who only pay the minimum payment each month. It is estimated that in takes the average consumer 15-20 years to repay a single account at a cost of 3-4 times the total amount charged! There must be a better solution, and there is.  

Debt Consolidation  

In order to determine if you qualify for a Debt Consolidation Program (DCP), you will need some basic information about the debts that you owe. (name of creditors, current balances, minimum payments, etc.) 

Once that information is gathered, a reputable Debt Consolidation Company can tell you what your monthly payment will be and how long it will take to get the debt paid off.  In a DCP: 

• You will have one monthly payment
• Lower your average APR
• Pay off your accounts in 3-5 years 
• Stop creditor calls
• Maintain or even Improve your credit score! (Although your credit score may decline slightly while you are in the program, once you have completed the program, your scores should improve. For more information, visit www.myfico.com )

But what if you cannot afford the minimum payment required by a DCP? 

Debt Settlement

Debt Settlement is a program designed for those who:

• Are facing severe financial hardship due to circumstances beyond their control (loss or lower income due to unemployment, lay-offs, divorce, disability, insufficient retirement income, etc.)
• Have considered a Debt Consolidation Program (above), but simply cannot qualify or afford the monthly payment required.
• Do not want to file for bankruptcy. 

If you have fallen behind in making your minimum payments (or are about to), Debt Settlement might be the best choice for you. Through this program, each month you will deposit an amount you can afford (based on your budget) into savings-settlement account.

As your savings-settlement account grows, offers are being made by the Debt Settlement Company for a settlement of your debts.  Although the final settlement amount cannot be guaranteed, it is usually much less than the balance. 

Most creditors will accept a settlement, but there are some cases where a creditor may attempt to seek legal action in order to collect the full balance. However, successful settlements can still be made in spite of a judgment. Most creditors would rather accept a settlement offer than force you to consider bankruptcy.

As you can see, there are options available to help you eliminate your debt.  Both the Debt Consolidation and Debt Settlement programs work for different financial situations, but the end result is the same.  Eliminate your debt in a short period of time and save money in the proccess!

Click HERE to get your FREE Personal Debt Elimination Summary!

Photo by: SMJJP

Is Settling Credit Card Debt on Your own a Good Idea?

People call in asking about our Debt Settlement program every day.  Once we discuss the program and how it works we are often asked the question, " Why can't I just settle these debts on my own?" 

The bottom line is, you can settle your outstanding unsecured debts on your own.  All you need to do is call up your creditors, explain your hardship situation, and make them a settlement offer.  Sounds pretty easy, right?

It's not quite that simple.  You absolutely can settle your debts on your own, but you would be doing yourself and your wallet a disservice!  Debt Settlement programs offer you years of experience and expertise in dealing with your creditors and collections agencies, and most of the time they can get your debts settled for MUCH LESS than you can on your own. 

Why can Debt Settlement programs get you a better deal?

1. Years of practice: Good Debt Settlement negotiators have been settling debts for years on end.  This is what they do, and they have had a lot of time to hone their debt negotiating skills.
2. No emotional attachment: When you negotiate your own debt, you are emotionally attached to the situation. The debt collectors know this and will use it to their advantage. 
3. knowledge of the rules: Although Debt Settlement programs do not need to have any attorney on staff, they do have to have an understanding of the debt collection laws of each state.  They know what a creditor can and cannot do in a given situation, so the creditors cannot scare them into settling for more than they should.
4. Peace of mind:Collections agents can be extremely threatening and scary to deal with.  It is the Debt Settlement negotiators job to handle all communications with your creditors.  You have a highly qualified professional in your corner and that in itself is indispensable.  
5. Dedicated savings plan: Most people don't have thousands of dollars sitting around to use when negotiating with their creditors.  Debt Settlement programs put you on a dedicated savings plan to build the funds necessary to get your debts settled once and for all!

These are just a few of the reasons why settling your own debt could cost you in the long run. Using the resources of a Debt Settlement program will save you money and relieve the pressure of dealing with your creditors.  Although settling your debts on your own can work, Debt Settlement programs are most often the better choice.  

“I’ve got too much credit card debt!  What’s the best way to eliminate it?”

 You have a few options:

• Hit the lottery and pay them off in a lump sum…yeah right!
• Continue making minimum payments…forever.
• A Credit Counseling Program or what is called Debt Management today.
• A Debt Settlement Program, or if all else fails…
• Bankruptcy

Short of paying off all of your credit card debt in a lump sum, you know that making minimum payments is a trick the credit card industry has been fooling consumers with for a long time.  Making the minimum payment on your cards could take 10-15 years and end up costing you 3-4 times the original amount you borrowed because of the interest rates and hidden fees.

Debt Management (formerly referred to as Credit Counseling) makes sense if you can afford the required payment of the program.  Legitimate DM programs will arrange repayment plans with each of your creditors that will lower your interest and fees and usually allow you to pay off all of your cards in about 48 months.  If you can afford the payment, this makes sense.

Debt Settlement is for those who cannot do any of the above.  Legitimate Debt Settlement companies will negotiate with your creditors to satisfy the debt for around 50% of the debt.  Your credit report will show this debt as having been charged off, but then it will show that it has been “paid as agree” or “account settled”.

If you cannot qualify for any of these programs, then bankruptcy may be your best or only option.  Be sure to seek the advice of a competent bankruptcy attorney.  It’s not a bad idea to get a couple of opinions when looking into bankruptcy.