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