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Overwhelmed by debt? Know your options
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(ARA) - If you find yourself in a financial hole you can't get out of,
it's important to know you have options. Being in debt can cause people
to continue to make payments that they can't afford or can barely
afford without much hope of ever eliminating the debt. If you find
yourself in this position, there are a few routes you can pursue to
free yourself from overwhelming debt.
First, getting out of debt on your own should always be your first
choice, if you can do it. The quickest way to save money and keep your
credit intact is to pay off your balances as quickly as you are able.
If you don't think that option is open to you, it might be time to seek
outside help. The Federal Trade Commission recommends looking at the
following options and finding what might work for you. When you examine
each of these possibilities, make sure the organization you are working
with is legitimate. Always beware of hidden costs and make sure you
know exactly what you will receive before you pay for these services.
* Credit counseling: If you don't think you can get your debt under
control by yourself, credit counselors can help you develop a plan to
get out of debt.
* Debt management plan: Often offered through a credit counseling
service, this allows the participant to make monthly deposits to the
service, which in turn will pay your bills as worked out with your
creditors. You will be required to make your monthly payments on time
and you may be barred from applying for additional credit while on the
plan.
* Bankruptcy: This is usually considered the last resort, but it can
allow you to have some of your debts forgiven completely. You may also
be required to put your car, house or other assets toward repaying your
debt. Bankruptcy stays on your credit report for 10 years and can make
it difficult to secure any type of credit during that time.
* Debt settlement
programs: Often considered an alternative to bankruptcy, debt
settlement, or debt negotiation programs, allow those with unsecured
debt (debt not tied to an asset, like credit card debt or medical
bills) to pay less than what they owe through negotiating with creditors.
"The goal of a debt negotiator is to obtain a debt settlement for you
on the current debt amount you owe your creditor. For example you may
owe one particular creditor $10,000, so the goal of the negotiator
would be to have you end up paying back say $5,000," says Steven
Veator, senior program adviser of Core Financial Services, a
Massachusetts-based debt settlement agency.
Recently, much attention has been brought to fly-by-night debt
settlement agencies that often only cause participants to go into more
debt. If you plan on enrolling in a debt settlement program, the United
States Organizations for Bankruptcy Alternatives (USOBA), a
professional organization for the debt settlement industry, recommends
taking the following things into account before enrolling in a program:
* Know in advance that your credit score will take a hit. Any debt settlement agency
promising otherwise is probably not telling the truth.
* Programs will often take two to three years to complete. If you can't
make the payments necessary to complete the program, don't enroll
because you will still be responsible for your debts in addition to any
program fees.
* Beware of hidden fees. Make sure all fees you will have to pay during
the program are agreed upon before enrolling in the program, along with
a payment schedule. The program will likely charge you beyond what you
will be paying back to your creditors for their work, so make sure it
is still a good option once these fees are included.
* Debt settlement is a private industry, so any organization that
speaks of a federal program for debt settlement is not telling the
truth.
* Don't stand for pressure or silence. A legitimate agency should not
pressure you to enroll and should allow you the time to make a
decision. You should also be able to freely and easily communicate with
the agency before enrolling and during the debt settlement process.
Some programs require you to default on paying your creditors, so have
a plan in place with your settlement agency on how to handle calls from
creditors if this is the case.
For more on debt settlement and answers to frequently asked questions,
visit www.coredebt.com.
Courtesy of ARAcontent
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