YOUR DEBT SITUATION – YOUR OPTIONS
WE UNDERSTAND YOUR DEBT
SITUATION
Your
unsecured debt has crept up and up, likely with “stop gap”
expenditures
(like a
car transmission, or uncovered medical expense).
The debt piled up, you were
distracted by everyday life, and the debt was never
“caught up”.
Now, because of additional
financial tribulation, a job layoff, a sudden illness,
business failure, or tax bill coming due,
you missed a payment. Suddenly you find out about “the
small print” in that credit card contract. The late fees or
over-limit fees are bad, but are not the worst consequence.
Now you find that your interest rate went from 10% to
29%. Your budget is now “in the red” each
month and you are “sinking in the
quicksand” of debt, toward bankruptcy.
How did I get here, you
ask (or your spouse asks!)? Life is tense. Everybody is stretched to the limits of
their good character, and the devil sees a crack in the
armor! The
“blame game” or the “name game” begins. Perhaps you have received a couple
horrendous collection calls!
You say, “I never intended
to be here! I’m not happy. I don’t want to live like
this. We CAN’T live like this!” You need strategy and you need it now! I
So,
you look around to what your options are, and you ask,
“What will work?".
YOUR OPTIONS
GET A SECOND JOB:
With this
option, your family time, church time, and social time
are
lost. Besides, you look at the numbers and, with the new
high interest rate on your debt, you realize it will
take you years to pay off the debt.
GET A DEBT
CONSOLIDATION LOAN:
Putting all your debts into one debt, creating a
lower monthly payment. By the time you
try this, your credit profile
won’t allow you to qualify for the loan. Banks
don't want to take on all the other creditors’
risk just to help you out. This type of loan is almost
never granted.
REFINANCE YOUR HOME TO
GET EQUITY CASH:
The conventional
wisdom is “Don’t turn unsecured debt into debt secured
by your home!” As it turns out, people in
financial trouble
can’t qualify, so the option is rarely used.
DO NOTHING:
No, leaving your future to the
creditors will just bring an ever-increasing deluge of
collection activity, judgments, garnishments and
bankruptcy. To change your situation,
you must change your actions (and for continued success,
change your financial lifestyle). Something must change
and it must be done now!
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Example:
Based on $20,000 in debt. |
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Struggling
to make minimum payments will cost over 300% of
your principal ($20,000) over 10+ years ($60,000+)
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CCCS – Consumer Credit
Counseling Service:
First, many banks look at this entry on a credit report
as a “Debt MANAGEMENT Plan” and treat it as if it were a
Chapter 13 bankruptcy! That kind of credit burden is
what you are trying to stay away from! This plan cannot
lower your monthly debt-service payment enough to make
your budget work. It takes longer to work and it costs
about twice as much (payments totalling140% of your
principal, instead of the 65% cost of Debt Settlement).
Why take longer, pay twice as much, suffer
greater credit history damage, and fail because the
monthly budget still doesn’t work? Besides, these
programs were invented by the credit card companies and
work more for them than they do for the debtor.
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Example:
Based on $20,000 in debt. |
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Pay 100% of principal ($20,000),
plus interest (10% avg.), plus monthly
fees . ALSO: credit score
effected for 12 years; there is no emergency flexibility
and you can be dropped
from program for missing a
payment (with all the reduced interest added back).
$460 monthly payment
(usually 2.3% of total amount owed)
60
months
to plan
completion (5 yrs.)
$27,600 total paid
(debt X 140%)
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BANKRUPTCY: "Life sentence" of higher
interest rates, denied loans, affect on employment,
ability to rent, etc.. Stressful, and to be
avoided if possible.
Chapter 7 (immediate
discharge of all allowable debt) This, frankly, is not a
welcome choice of the clients that come to Freedom
Financial Law for help anyway. Our clients feel a moral
responsibility to do the best they can, and not to
give-in to the temptation of paying nothing at all.
Besides, the new bankruptcy law restricts the
availability of this option (and forces people into
Chapter 13).
Chapter 13 (5
year court ordered payments, remainder discharged)Bankruptcy (of any
kind) is a “credit life sentence”. That is, though it
may come off your credit record in 7-10 years, most
credit applications today ask, “Have you EVER filed
bankruptcy?” To say “No” is a lie, not to mention civil
fraud or possibly a federal crime. So, having to
disclose a bankruptcy will probably mean you will NEVER
again get the BEST interest rate available for whatever
you are trying to buy. So, you end up paying more in
higher interest in the future, than you saved today!
Also, you still have to pay for an attorney, go through
depressing court proceedings, and the Bankruptcy Trustee
will still take a percentage of the money you pay as a
mediation fee. Lastly, the new bankruptcy laws can give
creditors MORE access to your assets than a
judgment would! You knew you didn’t want a bankruptcy,
now you know why!
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Example:
Based on $20,000 in debt. |
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(Chapter 7) Forfeit
property, court hearing, NO
CREDIT, Legal and other required
fees: around
$2000 or more.
(Chapter 13)
Same
as Chapter 7 (legal and other
required fees of around
$2000, or more), plus
you pay what the court orders
over 5 years
($5,000-$15,000), and
your case may be dismissed if
you miss a payment!
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OUR DEBT
SETTLEMENT: A well planned Debt
Settlement Program can be a win-win
solution for the debtor and the creditor, but it takes
the expertise of trained administrators and negotiators.
The good news is that no NEW money is required of the
debtor! The program efficiently uses the money a family
has already been trying (unsuccessfully) to eliminate
the debts with.
Creditors like this program because the debt is not
voided through Chapter 7 Bankruptcy, they don’t have to
administer a long payment plan like a Chapter 13, but
they still get about the same portion of their money
through a lump-sum settlement within a reasonable time.
Debtors like this program because they don’t have to
go bankrupt, the 36-60 month program allows them to
eliminate their debt while “doing the best they can”
despite their hardship, and it provides a foundation for
rebuilding future financial strength. Usually, all
unsecured debt can be eliminated (including all fees)
for about 65% of the total debt owed. And best yet, the
debtor’s credit strength can be restored to “average” within
6-18 months after program completion.
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Example:
Based on $20,000 in debt. |
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Pay only a
fraction, 50%
(industry average) of the principal
($20,000), one simple
monthly "settlement
deposit".
$361 monthly “settlement
deposit” (1.8% of total
owed )
36 months to
plan completion
$12,996 total paid
(debt X 65%),
possibly less!
DURING PROGRAM
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Immediate increase in available spending money
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Collection calls handled by negotiation agent
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Program designed to avoid litigation and/or
judgments.
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Have “emergency flexibility” of payments during
program
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After settlement, negative entries on credit report
(like lates, charge-offs, etc) are replaced with
“Paid-Settled” entry on report
AFTER PROGRAM
you will have established savings habits and …
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Freed up income to save for emergencies and
purchases
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Have “Credit-worthiness” (ability to repay) and
prime rates too
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Have a higher FICO (credit score) than you started
with
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Contact us today for more information about our Debt
Negotiation and Settlement Plan, and a complete list of
easy steps. It's easier than you think!
