Debt Settlement Solutions

When a person looks for debt settlement solutions, he needs to know about the options available so that he can make a wise decision. Debt settlement help can include consolidation, counseling, or bankruptcy. In 2005, Congress changed the bankruptcy laws to make it more difficult to file under certain terms so that people don't rush into bankruptcy rather than trying to settle debts. With the first option, the amount of the loans is not reduced, but the debtors time to pay back the money may be changed to enable him to handle his out-of-control financial situation. In other words, the loans are compiled into one payment, perhaps with a reduced interest rate, but the principal remains the same. With debt settlement solutions, the amount of the principal is negotiated with the creditors to reduce that amount by perhaps as much as 50 percent. This can save the debtor thousands of dollars and reduce the length of time needed to pay back what is owed.

When a person asks for debt settlement help, the agency will also advise the debtor on how to avoid getting into this predicament in the future. Some of the tips that may be given are to reduce household expenses so that the family can live within its means. The single or couple will learn money management skills so that they can avoid future debts and poor purchases. Perhaps one of these skills is learning how to use credit cards effectively. For some people who are addicted to using credit cards, that may mean cutting them all up and avoiding applying for new ones. Another important skill to learn is how to start and build a savings account so that emergency funds are available at all times. Some agencies will even offer software that helps to manage checkbooks and control spending. With these skills in hand, it is easier to put into place debt settlement solutions that will last more than just a few years. The goal is to become debt-free and to remain that way through wise use of money.

When asking for debt settlement help, a person can find agencies that will give free consultations so that the debtor can compare one agency with another. During this consultation, the applicant will find out the types of services offered by the agency and will be given a suggested repayment plan outline that will show methods for repayment. The applicant can ask questions and receive quick answers from the staff. One essential question to ask is to find out the types of fees and costs that will be charged for the services. Some agencies have hidden fees that elevate the cost of getting out of debt. Because these agencies have worked with creditors for years, they know how to negotiate lower debt levels and also know about the internal policies of each company. Therefore, an experienced and able counseling agency can broker much better deals that a debtor can alone. At the same time, the debtor has to pledge to follow the agreed upon plan for repayment or the negotiations will not be effective.

A persons financial credit history is affected by two things: the payment history and the amount of debt. This is called the debt-to-income ratio. That means that a person who earns $50,000 per year will not be able to handle as much debt as the earner making $100,000 per year. At the beginning, a debts-management program will affect the debtors credit score, but as the balances are paid off, the debt-to-income ratio will lower so that the credit score can go up. But the debtor must expect to work for years at recovering a good credit score rating even when using debt settlement help. For some, the repayment process can take from twelve to thirty-six months, but since everyones financial situation is unique, no one can predict how long the process will take. A person whose financial health plummeted because of a decline in salary or a piling up of loans such as medical bills, the process can take longer than expected.

One of the problems with debt settlement help is that many people do not complete the program, leaving themselves in even deeper financial problems. If a debtor uses a counseling service, creditors may add a statement onto his credit report mentioning this fact. This can harm a credit rating, depending on the situation. The most important step to take for an applicant is to check up on the agency before signing up with its program. Some agencies are funded by credit card companies, and therefore have a conflict of interest in serving the debtor. Make sure the agency is licensed and get a written guarantee for how long the process will take. The process will not take into account money owed for taxes or for student loans, so the applicant must understand that no agency can lessen these debts because they are with the federal government, not with a private company. Also, when using debt settlement solutions, the applicant must also be aware of how the lessened amount of the loans will affect tax collection. For example, if the original amount of the loan was $5,000 and it was reduced to $2,500, the amount of the reduction ($2,500) will need to be reported as income.

Most people feel terribly discouraged when the financial health deteriorates to this extent. But God can give rest. First Kings 8:56 says, Blessed be the Lord, that hath given rest unto his people Israel, according to all that he promised: there hath no failed one word of all his good promise, which he promised by the hand of Moses his servant. It is possible to find debt settlement solutions in the midst of financial turmoil.

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