Debt Relief

Consumer Credit Counseling (CCC) companies were first started by the credit card industry to provide debt solutions to the enormous amount of people who began to fall delinquent on their payments. The majority of the CCC are paid a commission from your creditor based on how much debt they can recover from you and they may also charge a service fee.

In some cases, the debt help of a true non-profit credit counselor may be helpful, as the reduction in interest rates may be enough to alleviate the financial strain a consumer faces. However, all too often the monthly payments required by CCC are just too high for many to afford. The monthly payments can be as high, or higher, than the minimum payments a consumer was paying prior to enrollment with CCC. Once you start the program, they will contact your creditors and enter you into a “Hardship Program”. Next, the creditor will ONLY reduce your interest rates. As you can imagine, credit card debt consolidation with CCC will take many years and the fall out rate of the program is extremely high. The bottom line is that companies are funded by your creditors, may require higher payments and only reduce interest rates—not principal.

Today, more than ever, people are filing personal bankruptcy as a way of getting away from the burden of their debt. Statistics show that the number one reason people are filing for bankruptcy is the harassment and pressure from companies that are trying to recover their money. For some people, bankruptcy is the only realistic option amongst the debt solutions available. Say, for example, if you owe $60,000 and you will never make more than $1,000 in any given month, then bankruptcy is the only option. The biggest benefit of bankruptcy is that this approach provides immediate relief and puts an immediate stop to the harassment. In some cases, all of your unsecured debt is forgiven and you get a “clean slate”.

New laws were passed that make it considerably harder and less desirable to file for bankruptcy as a way out. With this in mind, even if you are able to file for bankruptcy, there is a good chance you will still have to pay some or all of your debts over a period of time. To determine what type of bankruptcy you may qualify for we strongly encourage you to speak with an attorney in your state. Only a licensed attorney in your state can review what debt help and debt solutions are available to you through bankruptcy. Some attorneys may also offer other alternatives as well.
The negative aspect to consider with bankruptcy is the effect on one’s credit rating. The bottom line is that it will stay on your credit report for up to 10 years. In addition, you’ll pay immensely for those important purchases that you make later on in life. For example, if you want to purchase a house in the future, the interest rate will be much higher than for the average consumer who never has filed bankruptcy. In addition, bankruptcy may be taken into account when applying for a job, an insurance policy, applying for a car loan, filling out a renter’s application, etc. As you can see, bankruptcy isn’t as appealing as it may first appear, although in some circumstances it is the best if not only solution. Only a licensed attorney may provide debt help guidance as to whether bankruptcy is a suitable option for you.

When falling victim to financial problems, debt consolidation loans are one of the most common debt solutions people think of for credit card debt consolidation. In some instances, this option may be a good fit for you if you have excellent credit and can obtain a much lower interest rate with a manageable monthly payment. However, many people who choose to go this route find themselves in a much deeper financial trouble than they were to begin with. Most consolidation loans are secured by collateral, such as your house, car, or other personal property. By obtaining this type of loan all you are really doing is exchanging an unsecured debt for a secured debt that you will still need to pay interest on. Another downside is that it puts your assets in an accessible position for the creditor to go after in the event of default. In this case, all the leverage shifts over to the creditor. This option only makes sense if you can obtain a new credit card debt consolidation loan with a much lower interest rate and a payment that comfortably fits within you budget.

Recently we have seen an increase in the number of unsecured credit card debt consolidation loans. Generally, the interest rates on these loans carry similar if not higher than your original interest rates. Thus, the only real benefit is the convenience of one payment versus many. In some cases the interest rates on these loans are 20% or higher.

We recommend that all of our clients pay their bills on time and manage their debts wisely if at all possible. By doing so you will establish good payment history and this will reflect positively on your credit score. If you can comfortably pay your bills each month without debt help, we recommend that you continue to do so.

Unfortunately, if you are struggling to meet your minimum payments, just making the minimums or behind on your payments, you may be in a situation where your debt will take many years to pay off — if at all. By simply paying the minimum payments each and every month, as much as 85% of your payments are going to interest and it may take you 25 years or more to pay off your debt in full!

In the long run, minimum payments are not a solution to your financial situation. Consumers should consider factors such as expected future income as well possible budget changes when determining whether it makes sense to try and pay off credit cards on their own versus other debt solutions such as debt settlement or bankruptcy. For instance, if a consumer is expecting to be making more money in the near future, or has simply had a temporary financial set back, continuing with minimum payments might make sense. Conversely, if someone is on a fixed income and has analyzed their budget, continuing with minimum payments may not make sense and other debt solutions such as debt settlement, credit counseling or bankruptcy may be appropriate.

Consumers may also wish to contact their creditors directly and attempt to negotiate lower interest rates or payment terms on their own prior to seeking debt help or discontinuing minimum payments. Some creditors will offer short term hardship programs or lower payment terms. In many cases, creditors will not offer debt help unless the consumer is already past due.

Through the Snowball Method, you go after the first credit card with the smallest balance first, while paying the minimum on the other credit cards. This way, you remove one card at a time. The Avalanche Method requires you to remove the credit card with the highest interest rate first.

The advantage of DIY debt reduction is that it does not hurt your credit score and it does not cost anything beyond the interest that you owe. The disadvantage is that you may find that you are not making real progress toward your goal of being debt free. In that case, you can always consult with a Peachtree Certified Debt Specialist to analyze your situation and explore other options.

With debt negotiations, Peachtree Debt takes an aggressive approach to settling your debt. Our debt settlement program is designed for those consumers facing financial hardship who value getting out of debt over maintaining their credit score. Unlike most CCC’s or credit card debt consolidation programs that may only reduce credit card interest rates, Peachtree Debt aims to settle your debt for less than you owe without requiring you to obtain a new loan or file bankruptcy. With our professional debt negotiating team, we will work to settle your debts in as short a time as possible. Remember, Peachtree Debt works purely for you – not the credit card companies, collection agencies or creditors. Give us a call today to review all of the debt solutions available and get the debt help you deserve!