Debt Elimination Programs for Getting Out of the Trap
In Credit Repair of CreditGuru (March 8, 2010 7:20 am)
Various kinds of debt elimination programs are available for the consumer who has accumulated so much debt that he or she is experiencing difficulties in coming up with the monthly payments. This usually happens for those kinds of loans that are saddled with high interest rates, such as payday loans and credit cards. These are debt settlement plans, Chapter 7 or Chapter 13 bankruptcies, and debt management plans.
Debt elimination programs that are designed for managing debt usually concentrate on negotiating for affordable payments to the credit companies without having to request for a decrease in the outstanding balance. This specific strategy has the advantage of doing away with the annoying phone calls from collectors because the main concept is to negotiate for a feasible repayment schedule that is easy on the borrower’s budget. The negotiations could be made by a third party that often requires an upfront fee but consumers should be warned that that some companies have arrangements with the creditors where they are given a certain percentage of what is collected from the borrower. It may be possible that the service provider may agree to a payment schedule that is not exactly the best for the consumer.
Meanwhile, debt elimination programs where a big chunk of the outstanding balance is forgiven are the favorite of many consumers because of the savings that they take advantage of. However, this particular strategy may be entertained by the credit card company only if the outstanding loan balance has grown substantially. The main point is that the instead of collecting nothing in the event that the debtor is successful in filing for bankruptcy, the creditors may consent to a large reduction in the payment. The reduction could be as high as 60 percent but borrowers should also be careful with the companies that they are dealing with, particularly those that collect large upfront fees.
The debt elimination programs that should be the last options to consider involve the filing for Chapter 7 or Chapter 13 bankruptcy. In Chapter 7, the debtor can write off the loans if his or her income is less than the state median and he or she does not have non-exempt assets. Meanwhile, the consumer may opt for Chapter 13 if Chapter 7 is not possible. In this kind of bankruptcy, the borrower can repay his or her debts for a period of three to five years and after this period, the credit card debt can be erased. For more details check out http://bestdebtreductionstrategies.com.
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