In today’s world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind. As the result, debt incurred and accumulated over the time; initially, you are able to pay your credit card balances in full on each month and when more and more accumulated, you may go for minimum payment, then when come to the, your income may not afford to even support the minimum payments.

Like many who trap into unbearable debts, you may want to get rid of your debts by filling a bankruptcy. But bankruptcy can carry a legacy you will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find it difficult or impossible to obtain necessary credit in the interim.

Luckily, there are still others possible alternatives before you make up your ultimate decision on bankruptcy. You can enroll into a debt reduction program or enroll in a credit counseling program. These are the most popular debt solutions for many debtors, but you may confuse what are the differences between these two popular debt solutions, making you hard to decide your choice to enroll to credit counseling program or debt reduction program.

While there are some similarities between these two types of programs, there are some important differences to consider as well. Let us consider a few of the most important differences between debt reduction and credit counseling.

1. Close Your Credit Accounts

In credit counseling program, you will require to close all your credit accounts, exception for some exceptions like accounts for business needs, accounts with zero or very small balances. Whereas, debt reduction programs do not require all credit accounts to be closed. Sometimes, it’s good to keep a few of credit cards for emergency purposes.

2. Completion Period

Credit counseling services typically take longer to complete than debt reduction services. The average length of time to liquidate debt through a credit counseling service is 5 years whereas in debt reduction programs can be completed in less than a year.

3. Cost Saving

One of the advantages of debt reduction program over credit counseling program is in term of cost saving. In debt reduction program, you may only need to pay a settlement amount of 20% – 60% of amount owned. Whereas, in credit counseling program you normally need to repay a full amount owned with some discount and interest waived.

4. Credit Score

Your credit score is more affected in debt reduction program as compare to credit counseling program. In debt reduction program, the creditors may report the remaining amount between the amount you owned with the settlement amount as the “deficiency balance” to the credit bureaus as a negative item and it will be noted at your credit report and impact your credit scores. Generally, credit-reporting agencies will re-age the accounts of consumers enrolled in credit counseling services after three payments have been made.

5. Bargaining Power

In credit counseling program, your credit counselor will come out a debt repayment proposal to your creditors and it relies on your creditors to accept or reject the proposal. Whereas, with a debt reduction program, all creditors are will be notified about your hardship situation to repay your debt and you are desired to resolve it through a negotiated debt reduction agreement. Hence, creditors have no much choice in debt reduction program except try to negotiate to get back as much payment as possible from their debtors.

In Summary

Both credit counseling program and debt reduction program are a better debt solution option than bankruptcy. The two programs serve the same purpose to help you to get out from debts, but there are some differences between these two debt solutions and each program has its own pros and cons.

Before you employ the services of a settlement company, it is very important to find out whether you qualify for settlement or not. Secondly, you should get basic information about debt settlement and the business practices of settlement companies. Once you have this information in your hand, you should start searching for the best settlement company around.

Most of us make the mistake of simply barging into the office and talking about a settlement. You should not expect the company to educate you as far as the various aspects and facets of this deal are concerned.

There always is a possibility that a debt consolidation may be the perfect solution for you. If you rely on settlement alone, you may end up suffering from high debt and you may lose money that was paid as fees to the company as well.

Finding the right a settlement company requires a bit of hard work from your side. If you make use of the World Wide Web properly, you can overcome this problem as well. Just employ various regulatory trade bodies and business analysis websites to find out whether the settlement company you are dealing with or planning to deal with is a reputed one or not.

Secondly, you can make use of guidelines relating to the disclosure agreement and the fees as laid down by trade bodies to judge whether the company is a reputed one or not.

Now that that you have the necessary information to identify a genuine company and distinguish it from a fraudulent company, you should make use of debt relief networks. These networks bring you right to the doorstep of the settlement expert.

Simply provide the information required in the website and experts will contact you. You can implement the various points that you have learned and you can utilize the same to quickly identify the right company.

There are some who are very disciplined but ended up in debt problems because of an emergency. On the other hand, you may have made irresponsible use of your credit card and may be regretting the same. Your choice of the settlement company will depend on the type of borrower you are as well.

In case of the former, you will need a settlement company that will give you the assistance required and step away to let you take care of the rest. In case of the latter, you will need a settlement company that will not only help you get the deal but also educate you about the various aspects and facets of financial management.

Credit counseling is becoming more and more popular these days. Many consumers find themselves in financial situations that are spiraling out of control. They want and need help, and so they turn to a Christian credit counseling service.

But which credit counseling service should you choose? Is it even the right choice? Here are some things to keep in mind when looking at a Christian consumer credit counseling service.

How Christian Consumer Credit Counseling Works

A Christian credit counseling service is a good choice when it comes to managing your debt load. They will help you list all of your income and expenses for developing a personal budget. Based on your financial situation they will help you create financial goals and an action plan to achieve the goals.

Through a debt management program a Christian debt counseling service will negotiate with your creditors for you and help you settle your debts for less than what is owed. They can get your interest rates lowered and late fees reduced. You will then give the credit counseling service a specified amount each month and they will distribute the money to your creditors.

Different Types of Christian Credit Counseling Services

There are many Christian credit counseling services from which to choose. There are nonprofit debt management and credit counseling agencies. But you can also find for-profit organizations that offer debt management services.

Chances are, if you are having financial difficulties, it would be difficult for you to pay someone for their help. Fortunately, there are many Christian credit counseling companies who offer their services for free or for a nominal set up charge. The reason they can offer their services at no charge is because your creditors pay them to help you manage your debt.

There are some legitimate credit counseling services who will charge you for their services. These may have counselors with special training or be able to offer something that the free services cannot. Before you choose one of these, be sure that you are truly getting a better deal.

Reason to Work with a Christian Credit Counselor

Many people of faith choose a Christian credit counseling service because it reflects their values. There are many Christian credit counseling services who will structure your plan to allow you to work tithing into your budget. They will also teach you how to avoid getting yourself back into the same situation you are in now.

The counseling portion of the program is just as important as the negotiating with your creditors. These companies will help you to establish a budget. This will allow you the freedom that comes with living within your means. The goal is for you to pay off your debts and then manage your finances in a responsible, Christ honoring way.

Using a Christian credit counseling service is a good move for consumers who want to take control of their debt. Choose a credit counseling service that is reputable, has reasonable rates and have your best interests at heart. Keep an open mind to all of that you will receive and they will get you on the path to financial freedom.

Media personalities often praise credit counseling agencies for their non-profit status while criticizing debt settlement companies for charging fees for their professional services. What many consumers do not realize is that consumer credit counseling agencies collect the same (and often more) fees from their clients than debt settlement companies. The difference between the two is that one collects those fees directly from consumers while the other collects them as commissions from the creditors. However, the fees come from consumers’ pockets regardless.

Consumer Credit Counseling Fees

 

Consumer credit counseling services assist indebted consumers by helping them develop a budget and repayment plan. The repayment plan requires consumers to send in one payment each month, which the service distributes to the multiple creditors in each debt management plan. The service will often secure lower interest rates on their client’s credit card accounts to help ease repayment.

 

Some consumer credit counselors may take a setup fee or a monthly donation directly from consumers. However, the bulk of their funding comes from creditors through what is known as “fair share” donations. These “fair share” donations come out of the monthly payments the service collects from consumers and usually amount to about 15 percent (sometimes less) of what the service collects. So, if a consumer is sending in $1000 per month to the service, the service may collect $150 per month in commission-like donations from creditors on the backend. Essentially, the consumer is paying for the service; it’s just arranged in a way to help maintain non-profit status so the service and the creditors benefit from the tax breaks associated with this non-profit status.

 

Debt Settlement Fees

 

Debt settlement services assist indebted consumers by helping them develop a budget and a savings plan that involves consumers depositing funds into a third-party savings account each month. These funds are left alone to accumulate until there is enough to negotiate a settlement with a creditor. Because consumers who are eligible for debt settlement are experiencing a financial hardship and are already behind or about to fall behind on their credit card bills , they use what little money they have available to save up for settlements. Once enough funds are available and a creditor agrees to partially cancel a debt (for example, a creditor accepts $5,000 to fully settle a $10,000 balance), the consumer starts saving up for the next settlement until all eligible debts are settled.

 

Debt settlement companies are somewhat less standardized, partly because the industry is newer than the credit counseling industry and partly because creditors do not have the control over debt settlement that they enjoy over credit counseling. However, growth in the industry and industry trade groups are helping standardize much of the industry. Regardless, it’s not uncommon for debt settlement companies to charge a setup fee and a monthly service fee. Many companies typically charge around 15 percent of the enrolled debt amount, which they break up into monthly installments over the life of the program. If 15 percent sounds familiar, it’s because that’s how much of each payment credit counseling services often receive as commission-like “fair share” donations from creditors.

 

So, what’s the difference?

 

Consumer credit counseling services help consumer repay 100 percent of the debt owed plus interest, although at a reduced percentage. The service typically earns 15 percent (sometimes less) of what they are able to collect for creditors. So, if a service is able to collect $10,000 from a client, the creditor may reward them with a $1,500 donation. The client pays the full $10,000.

 

Debt settlement services help consumers negotiate reductions in the amount owed in exchange for lump-sum settlements. Debt settlement services are more upfront about the fact that they earn fees for the services they provide and, instead of filtering these fees through creditors on the backend, debt settlement services collects fees openly from consumers. However, if a client settles a $10,000 debt for $5,000, the $1,500 in fees paid to the debt settlement company just saved them $3,500 over what they would have paid through credit counseling services. Not bad, even for this simplified example.

 

As far as consumers go, a consumer who cannot afford to repay all unsecured debts but who is also looking to avoid bankruptcy is often better served by a debt settlement service. Unfortunately, this is the situation for a growing number of consumers as unemployment and foreclosures hit record levels. Debt settlement fills the gap between credit counseling services that require full debt repayment and bankruptcy, which may cancel all debt.

 

How to choose?

 

Do the math. If you can afford to fully repay your debts and you just need a little help organizing repayments and lowering ultra-high interest rates, then you may want to look into consumer credit counseling services. However, be sure to only approach those agencies approved by the U.S. Trustee Program at http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm. If you are terribly worried about your credit score, then this route may be best for you.

 

If you do the math and discover that full repayment isn’t feasible, but you believe you can partially repay your debts, then you may want to look into debt settlement services. However, be sure to pursue companies that belong to industry groups, such as the U.S. Organization for Bankruptcy Alternatives (USOBA) or The Association of Settlement Companies (TASC) because membership in these groups demonstrates a company’s adoption of certain consumer-friendly standards. You should be aware that the debt settlement process can be more temporarily damaging to your credit score than consumer credit counseling’s debt management plans (neither option is as damaging to credit as bankruptcy). But, that should only matter if you are looking to take out more loans — something that shouldn’t concern someone struggling to get out of debt.

 

If you find that you can’t even repay half of your debts, then you may want to speak with a bankruptcy attorney about your options. Bankruptcy has the greatest negative impact on credit, but regaining the ability to pay for food and the roof over your head will likely out-weight credit concerns if your are contemplating bankruptcy.

 

Can’t I negotiate my own settlements?

 

You can negotiate your own settlements. There is no law requiring consumers to hire debt settlement companies to settle your debts. However, many consumers find the headache of developing the plan, setting aside funds and dealing with creditors more stress than they care to manage. The know-how of debt settlement is also a factor for many consumers. Negotiating settlements is a delicate matter, and doing so without understanding the ins-and-outs of the process can sabotage efforts. However, there are do-it-yourself debt settlement kits available that show consumers what they need to know to successfully negotiate their own settlements directly with their creditors. The kits are typically inexpensive and can save you thousands of dollars you would have otherwise paid in debt settlement service fees.

 

Do a search for “diy debt settlement kit” to find a kit one that may work for you.

Most of us are very confused as far as the impact of debt settlement on the credit score is concerned. When you do not know whether your score or rating is good or bad, it obviously is going to complicate matters. Rather than relying on offline resources, it makes sense to make use of the World Wide Web and your debt settlement expert to find the answer.

What is the guarantee that the settlement expert will give you impartial and accurate information? Well, there is no guarantee. That is a reason why you should not rely on a single source of information. You should check out multiple sources including the World Wide Web, its forums, blogs and the news articles. You can easily get in touch with a credit counseling service providers who offer free advice.

You can check out resources set up by the government to promote better financial planning and understanding. You can pose questions to each and every resource and find out whether settlement will have a negative impact on the credit score and whether the impact will be a prominent one.

Once you have accumulated the resources and once you have a clear idea of the answers provided by various sources, it is time to pose this question to the settlement company. This approach has multiple advantages. For starters, you will have a general idea of the concept before you approach the experts.

Secondly, you will have the opportunity to find out whether the settlement company provides genuine information or not. Thirdly, you will be aware of the various tips and hints to improve your credit score and maintain it at a high level even if you do not opt for settlement.

As far as the specific point of credit score is concerned, the fact that you have settled your debt for discount is definitely going to have a negative impact on your credit score. That is unavoidable. However, it is not as bad as some experts make it seem.

You will not have to deal with this problem for years and a stretch. This is because of the law does not require any compulsory mention of this point. Once you improve your credit history, you can easily convince lenders to overlook this point. This is something that is not possible as far as bankruptcy is concerned. You do not become helpless as far as debt settlement is concerned.

The emergence on consumer credit counseling over the past few decades is mainly due to the increasing number of Americans who continue to charge their way into unmanageable debt. This is not to say that there aren’t some families and individuals who have ended up in debt due to no fault of their own – whether it is due to high medical bills, illness, death or a change in family status. But most end up in debt because of charging too much on credit cards and store cards and buying things on credit that they wouldn’t otherwise be able to afford. At some point you just can’t keep up with even the minimum monthly payments, which in turn causes a huge amount of the debt to be just the interest owed.

For many individuals and families who find themselves in over their heads, bankruptcy can seem like the only answer. As a result of this consumer credit counseling organizations have emerged to try to deal with this growing problem by helping people manage their debts and make arrangements to get them out of debt. This is often the last step before bankruptcy.

In fact, recent bankruptcy laws have been introduced that require individuals to obtain consumer credit counseling before filing for bankruptcy in an effort to reduce the high cost of lawyers and court fees. Consumer Credit counseling is usually the best option because it allows to you manage and clear your debt without the negative impact of a bankruptcy on your credit report. Bankruptcies can stay on your credit file for up to 10 years and can seriously hinder your ability to obtain any type of credit or loan, and will bring down your credit score which can make it difficult for you to do anything from renting a house to getting a job that requires a security clearance. It can even affect your ability to open a bank account with an overdraft feature.

However, consumer credit counseling is not provided free of charge and not everyone can afford to obtain these services. Some are so deeply in debt that they can’t even afford help to get out of debt. But if you can go this route, you can get relief. Consumer credit counseling agencies can help you by getting your monthly payments reduced, getting interest rages reduced, getting over-limit charges and late charges waived and can help you consolidate all your payments into one payment to them. This will enable you to eliminate your debt entirely and clear your name, as well as rebuild your credit.

By missing a payment or being late to pay once or twice, credit card debt can suddenly pile up dramatically. This can lead to minimum monthly payments in the hundreds of dollars. When you can’t pay, the creditors that you owe may begin to threaten you, claiming that they will sue you for the money you owe.

There are a minimum of three possible actions that an individual can take in order to prevent being sued by a credit card company. They can file for bankruptcy, take advantage of the help offered by a credit counseling service, or limit the amount of money they spend each month to produce extra money that can be used to pay off their debts.

Bankruptcy: The Right Choice for You?

Bankruptcy is a viable option if your debt has become so uncontrollable that you have no hope of paying it back. A bankruptcy lawyer can explain the details of the process to you and help you decide if it is the right choice for you based off of your circumstances. Filing for bankruptcy can give you some time to rearrange your debts and set up a good plan for paying off your debts. And it will definitely stop creditors from barraging you with threatening phone calls.

Since bankruptcy will cause severe damage to your credit score for many years after you file, you should not make this decision lightly. It is imperative that you speak with a lawyer who specializes in bankruptcy law and determine if this is your only choice.

Credit Counseling: The Best Choice?

If you don’t want to file for bankruptcy, you can also avail yourself of the help that credit counseling services offer in order to stop credit card companies from suing you because of debt that you owe. These services try to negotiate a payment plan with your creditors after analyzing your financial situation. When an agreement is made between you, the credit counseling service, and your creditors, you will only have to pay one monthly payment to the credit counseling service. They will then distribute your payment to the creditors.

Although using a credit counseling service can cause your credit report to show that you have made late payments, any negative repercussions that doing so does to your credit will not be nearly as serious as they would be if you had filed for bankruptcy.

Government credit card debt counseling is part of a larger government program designed to help consumers manage their debt. Debt creates an overwhelming sense of despair. Living from paycheck to paycheck and juggling your credit card bills can trigger a cycle of debt and misery that is hard to escape from. As a way of protecting consumers the Federal Trade Commission is offering government credit card debt counseling and debt consolidation counseling programs. These programs are a requirement for debtors who file for bankruptcy. This is called mandatory counsel and according to the federal rules of bankruptcy procedure 1007 (b), 3 “an individual debtor must file a statement of compliance with the credit counseling requirement…”

What do these programs do? They offer practical advice and training on government debt consolidation methods, and provide access to approved credit counseling agencies. A first stop for borrowers looking for help is the Federal Trade Commission website (ftc.gov). There you can find guidelines on how to manage your debt, and contact details for government approved credit counselors. The first piece of advice the FTC offers is to contact your credit card company and “try to work out a modified payment plan that reduces your payments to a level you can manage.” The second tip you will get is to contact a qualified credit counselor. At The Department of Justice website (http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm) you can find a database of government approved credit counselors. This is part of the Justice Department’s that supervises bankruptcies and trustees. The Federal Trade Commission recommends you always crosscheck an agency that claims to be approved by the government against this database.

Debt consolidation counseling should provide sound advice on how to deal with your credit card debt. This might include, among other measures, applying for a debt consolidation plan (DMP), or even filing for bankruptcy.

What is a Debt Collector – These are third party companies that collect debts on behalf of credit card companies, banks, hospitals and other businesses. When a creditor decides their chances of collecting a debt are pretty slim, they oftentimes turn the debt over to a debt collection agency for recovery. Here’s how the process typically works… a debt collection company purchases debts from the original creditor, usually for pennies on the dollar or on a contingency basis. Next, they then attempt to recover all or a portion of the original debt.

The issue is not the fact that they are attempting to collect debts. The issue is the manner in which they go about it. Even in light of the fact that we have laws in place to protect consumers, numerous debt collection companies still resort to illegal practices. That includes but is not limited to: harassment, coercion tactics, verbal abuse, threats of violence and illegally accessing/freezing debtor’s bank accounts. If you or someone you know has been contacted by a debt collector, these five facts are crucial to how they will deal with you and how you will deal with them. Learn them and pass them.

Fact #1 More people complain to the (FTC) Federal Trade Commission about debt collectors than about any other industry. The complaints are so many that some attorneys are making a great living specialize in suing rogue collectors. Apparently, it goes without saying that debt collectors don’t always follow the (FDCPA) Fair Debt Collection Practices Act. Get a hold of this, in 2007, the (FTC) received more than 70,000 complaints against companies and individuals engaged in questionable and illegal debt collection tactics. 

Fact #2 Just because you may owe money to a creditor, as a consumer, you still have rights under the (FDCPA) and state laws. Prior to these laws, debt collectors operated without impunity. Meaning they would call you all hours of the day and night, use abusive language, threaten you and use other demeaning tactics that forced some debtors into mental and emotional breakdowns.

Fact #3 Almost all third party companies involved in collecting debts hope you know nothing about your rights under the FDCPA or those afforded to you by your state. Your lack of knowledge puts them at a decided advantage. That’s why it’s critically important, if someone ever contacts you to collect on a past due bill or debt, assume they are going to violate FDCPA, stop everything you’re doing and immediately learn your rights. Also, contact your state to find out what laws they have in place to protect consumers from unethical debt collection practices.

Fact #4 When one of these collectors violates your rights, FIGHT BACK! Even though you may owe the debt, never allow any debt collector to push you around. Inform them, that when they deal with you, they will do so according to the (FDCPA) and your state laws. By taking this stance, you put them on notice that your Federal and State protected rights WILL NOT be violated.

Fact #5 No matter how powerful they appear, no company engaged in the debt industry wants to appear on the radar of the FTC Federal Trade Commission or be red flagged by any state Attorney General. Chances are, when that happens an investigation has already ensued and the authorities are about to drop the cease and desist bomb. If any company or person has violated your Federal or State rights under the LAW, don’t even think about it, SUE THEM!