YOUR DEBT SITUATION – YOUR OPTIONS
YOUR DEBT SITUATION:
Your secured debt, your
home, has always been necessary and manageable. So were
the secured loans for your car(s). However, your
unsecured debt has crept up and up. Perhaps it was an
occasional purchasing indulgence (like a birthday of
Christmas), but most likely it was “stop gap”
expenditures
(like a
car transmission, or uncovered medical expense). Either way, 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, student loan or tax bill coming due,
you missed a payment. Suddenly you find out about “the
secret of the small print” in that credit card contract
nobody reads. But the new, enormous late fees or
over-limit fees are not the worst consequence, however.
Now you find that your interest rate went from 10% to
29%. Keeping up with minimum payments is even harder! As
a matter of fact, your budget is now “in the red” each
month and you are “sinking slowly (or rapidly) in the
quicksand” of debt.
How did I get here, you
ask (or your spouse asks!)? Life is tense. The family is
less patient. Everybody is stretched to the limits of
their good character, and the devil sees a crack in the
armor! (Of course, he has probably been working in the
background all along!)
The
“blame game” or the “name game” begins. Perhaps you have received a couple of the
horrendous collection calls! Whatever the dysfunction,
you find the family economically “lame” and unable to
prevent a downward spiral into financial failure.
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 a life-line, a
rescue, and you need it now! Is there a debt
consolidation technique that can achieve a settlement
and elimination of your burdensome debt?
So,
you look around to what your options are, and you ask,
“Who can I trust?”
When
you are stuck in debt that you can no longer afford...
you have several options.
The examples below illustrate just how effective our debt
negotiation service is, and what to expect.
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 20 YEARS of minimum payments to retire the
credit card debt! (based on $10,000 at 19% interest and a
minimum monthly payment of 2.4% of the principal). At
the end of this solution you will have a new large debt,
a funeral!
GET A DEBT
CONSOLIDATION LOAN:
Putting all your debts into one debt and creating a
lower monthly debt-service payment (which usually isn’t
low enough) sounds like a good idea. But by the time you
try this, your credit score or total credit profile
won’t allow you to qualify for the loan. Besides, banks
very rarely 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 make an unsecured debt into a debt
secured by your home!” So, if done, it must be done with
a discipline to NOT run up new debt (and the statistics
are that 75% percent of people fail at this). Also, the
refi must create a substantially improved monthly budget
cash-flow. Also, it needs to have a flexible escrow
plan, so the debts can be negotiated down before
payment. As it turns out, usually, people in trouble
can’t qualify for a good refi rate (if they can qualify
at all), so the option is rarely used.
DO NOTHING:
Right! As if sticking your head in the sand like an
Ostrich could help! No, leaving your future to the
creditors will just bring an ever-increasing deluge of
collection activity, judgments, garnishments and
bankruptcy (and maybe divorce as a side-affect!). 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+)
with never-ending
interest, late fees, over-limit fees, collection fees,
lawsuits, judgments, executions and liens that must be
paid before a home is bought or sold.
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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 about twice as long to work
as “Debt Settlement” (60 months instead of 30), and it
costs twice as much (payments totalling140% of your
principal, instead of the 65% cost of Debt Settlement).
Why take twice as long, 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), Interest (10% avg.),
fees per/mo... ALSO: credit score
effected for 5 years; late fees can still occur; dropped
from program (no emergency flexibility) for missing a
payment with all 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.... depressing. Not a very good
way to reduce stress and IMPROVE your financial
strength.
Chapter 7 (zero pay) 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 best-effort pay). 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 lawsuit
judgment would! You knew you didn’t want to go bankrupt,
now you really 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 24-36 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 “above
average” within 12 months after program completion.
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Example:
Based on $20,000 in debt. |
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Pay only a
fraction (40%
average) of the principal
($20,000), one simple
monthly "settlement
deposit".
$400 monthly “settlement
deposit” (2% of total
owed, or less )
33 months to
plan completion (33
months)
$13,200 total paid
(debt X 66%),
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!
About You