Helping You Avoid Life's Financial Mistakes

Can Debt Settlement Rescue You From Financial Crisis

March 19, 2010 By 1 Comment

Today I have a guest post for you from David Brown a financial writer the Oak View Law Group. He writes also has written articles for several blogs as well.

You must have come across the ads that claim to reduce your debt by 60% and save you from the annoying collection calls. Well, we are talking about debt settlement. Can it be an effective solution to your monetary problems?

Debt settlement can indeed be the right choice for you if your finances are out of control and lenders are knocking at the door. However, it can also leave you in a bigger mess. Read on before you decide to settle you debt.

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  • Many debt settlement companies are scams. They take your money but don’t do what they are supposed to do. The fees that they charge are quite high. Moreover you won’t get a straight answer from them regarding the fees. Usually they charge around 20% of the amount that is forgiven. So if you are confident about your debt negotiation abilities then you better call your creditors directly and try to settle your debt.
  • Apart from the fees charged by the settlement company, you have to pay taxes on the amount that is forgiven. Clearly you don’t save the entire amount that is forgiven.
  • Debt settlement will look pretty bad on your credit report. The credit report may state “debt paid off in less than full amount” Or “settled in full”. However your credit score starts improving after your debt is settled. It is not recommended to take the help of credit repair companies. They mostly vanish with your money without fulfilling their promise. Moreover your credit report will improve only with time. So credit repair does not help much.
  • It is not easy to qualify for debt settlement loans. You must be several months behind your payments and must have large outstanding credits to be eligible for such loans. Moreover you must look like an ideal candidate for bankruptcy. In short you must convince your creditors that you cannot pay back the entire amount under any circumstance. Only then you will be considered as eligible for debt settlement.
  • It usually takes sometime to settle your debts because of two reasons:

1.      It takes time to negotiate debt with the creditors.

2.      The debtors usually don’t have enough money to pay the settlement amount right away.

While you negotiate with the company interest and financing charges rack up. This adds to your debts and makes your situation all the more wretched. You can also get collection agency calls during this period.

You must understand that debt settlement is not for everyone. It is ideally for people who are heading towards bankruptcy. If you have manageable debts then consider other solutions like debt consolidation. So keep in mind the above points and then decide whether debt settlement is the right answer to your financial troubles.

Filed Under: Debt Managment Tagged With: ,

Debtmerica Relief Review

August 5, 2009 By 10 Comments

What Is Debtmerica

Debtmerica is a debt negotiation company that helps individuals pay off their debt, and in most cases a lot faster than they thought possible.  Lately, I’ve been hearing about debt negotiation companies on the radio, but the real question is are they real or is their a Debtmerica Relief Scam?

I can’t speak for all of them but I can speak for Debtmerica.  Why, because I have worked with the company personally and in today’s article I am going to be giving you an in-depth review of Debtmerica.

I will be covering all the good and bad things about going through debt negotiation and help to give you a well rounded view of Debtmerica Relief.

How Debtmerica Works

Debtmerica is not like most debt companies.  What makes them different is that they work on your behalf to negotiate lower settlements for your debt.  I know what you’re thinking this kind of sounds like debt counseling but it’s not.  Debt counseling doesn’t usually negotiate your debt they merely help you pay off all of your debt.

What Debtmerica does is negotiates all of your unsecure debt to lower balances and then combines all of your unsecure debt into one simple payment.

However, there are limitations to these kinds of programs.  As great as this program sounds you still have to qualify in order to take part in it.  I will cover what you need to do to qualify later on in this article.

What Debt Qualifies

If you’re thinking of using a debt negotiation company like Debtmerica to get out of debt you first have to understand not all debt qualifies for this program.  Debtmerica only accepts unsecured debt not secure debt.

So what is unsecure debt?

Unsecure debt is debt that is not backed by an asset of any kind.  For example a mortgage is not an unsecure debt because it is back by the asset of the property itself.  On the other hand credit cards are unsecure debt because they are not backed by any assets.

So here are a few debts that wouldn’t qualify with Debtmerica.

  • Auto Loans
  • Payday Loans
  • Military Accounts
  • Public Utilities
  • Student Loans
  • Loans with Collateral Attached (Mortgages, HELOC’s)

So what kinds of debt qualify with Debtmerica?  Any of the following will qualify.

  • Credit Cards
  • Personal Loans
  • Credit Unions
  • Medical Bills
  • Deficiency Balances
  • Collection Accounts
  • Past Due Bills

What I Like About Debtmerica

With Debtmerica there is one great advantage with them and that’s the cost.  If you were to go through a full fledged chapter 13 bankruptcy you will have to deal with attorney fees, court cost, and more.

With Debtmerica the fee is included right into the actual lump sum payment along with your other debt.  The fee they charge is only 15% of your total debt.  So if you have $10,000 of unsecure debt it cost you around $1500 broken down into periodic payments.   So if it would take you 3 years to pay off all of the debt you would pay right around $42 a month to Debtmerica for their cost.

An Example Of How The Program Works

Let’s say you have $25,000 of unsecure debt with a payment of $380.  What Debtmerica will do is contact all of your creditors and negotiate a deal with them.  Some will be willing to make a deal others will not.  Let’s say they were able to cut $10,000 off of your balance, this would bring your total balance to $15,000 and a payment of $140.

By going through the program you would be cutting off around $240 off of your payment but you also would have to factor Debtmerica’s cost in their as well.  Their cost would be 15% of $25,000 which would be $3750.  If you would spread the payments over a 4 year time span you would pay around $78 a month for Debtmerica and total payment of $218 each month.

Not bad.  Although this is just an example it will give you good idea of how the program works.

What I Don’t Like About Debtmerica

Up until this point I have talked about all the great things about this program and what it can really do but I haven’t yet to cover some of the negatives about Debtmerica.

First off, Debtmerica may sound like an easy alternative to bankruptcy or debt counseling but that doesn’t mean going through a debt negotiation program won’t leave any black marks on your credit report.

In fact, going through a debt negotiation program is kind of like filing for a mini bankruptcy.  Why does this happen you might ask?  Debt negotiation has one thing that is very similar to doing a bankruptcy and that is negotiating your debt.

Whenever you agree to pay a less amount on a debt the company that holds the debt will usually report that to the credit bureaus resulting in a nasty mark on your credit report.  I’m not sure how much this will affect your credit score but it defiantly won’t help it.

Second, you may also experience collections calls in the beginning due to the fact that they may be withholding a few of the payments to build up the cash flow.  However as the program processes it should go away.

Who’s Right For Debtmerica

Not everyone is right for this program so take a look at some of the qualifying factors and see if this program is right for you.

  1. All of the debt you include into this program must be unsecure as show above.
  2. You must have at least $10,000 of unsecure debt to qualify for the program.
  3. Each account must have a balance of at least $500 to qualify.
  4. You have to stop adding debt to your to your accounts.
  5. You should have a job.  Without a job you won’t be able to keep making payments towards the program.

How Do I Sign Up With Debtmerica

If you would like to give debt negotiation a shot and see if it is really for you checkout Debtmerica here. Here you will be able to either call their toll free 800 number and talk to someone directly or if you prefer fill in their simple questionnaire and get a free quote.

Being in debt isn’t fun so take some time check out the program and give it a shot.

Chris

Filed Under: Reviews Tagged With: , ,

How To Get Out Of Debt When You Owe More Than You Make

June 1, 2009 By 2 Comments

Not Everyone Can Get Out Of Debt By Themselves

About three years ago when I was still in financial services I was asked by a new recruit of mine to see if I could help someone who has a lot of debt issues.  I agreed but didn’t make any guarantees that I could do anything.

When I arrived at the appointment and began rummaging through all of the statements, I realized that they had over 20 different credit cards with almost all of them maxed out to the limit.  This totaled almost $200,000 in debt, not counting their $250,000 mortgage debt.

These people were obviously in some serious trouble, but that’s not even the worst part.  If they would pay even just the minimum payments to all the cards they still would even break even at the end of the month.

These people defiantly needed some professional help.  What made the situation worse is that she was not willing to try anything I said.  She made plans to file for bankruptcy and was convinced that it was the only way to solve her problem.

debt-crunch

In this post I hope to give a little more direction on what you should do when you fall into a situation like this.

What You Should Do If You Can’t Pay Off Your Debt

Minimize Your Payments. By cutting down your payments to the minimum amount owed you will be able to at least keep afloat.  However, there are other things you can do besides just paying the minimum amount on your credit cards.

Look into cutting down your interest rates as well.  You can do this by calling the credit card company and negotiating a deal with them. You can also try non-profit credit counseling if you would like to learn more about this option.

However,  this doesn’t mean you should just pay the minimum amount on your debt at all times. The point of cutting down to the minimum is being able to focus more money towards one debt then just paying a little towards all of them.  If you want to learn more about how to set up this kind of debt plan click here.

Increase Your Cash flow. Next you need to look for ways to increase your cash flow.  There are all kinds of ways to do this.  First off, you could find a part time job, in order to bring home a little extra money until you get a few more debts paid off.

Second, you could start a part time business.  This isn’t the quickest way to generate extra cash but over time it is the most effective.  In fact you may need a little extra cash to get started with a part time business so this may not be a viable option right now.

Third, you could sell things from around your house. This is an easy way to generate extra cash quickly.  Check out this article to learn more.

Bring In Professional Help. If you still can’t get a grip on the situation you have several options to think about.  I will run all them briefly here but I will also give you a link to some more info that will help you better understand each option.

First, you can look into a debt counselor.  This is a way to work out your debt issues with someone one on one.  In most cases you will have to pay back most of your debt here but with this method you have someone who will guide you through the process.

If you are interested in this option click here.

Second, look into debt negotiation.  Debt negotiation is kind of like going through a mini bankruptcy.  This kind of company will negotiate a deal with your creditors and lump all of your payments into one single payment.  This payment is usually all you need to pay because it will also include your fee for the debt negotiation company.

If you would like to learn more about this option click here. I also recommend this option over bankruptcy because the effects are not as bad a bankruptcy.  So here is a company I recommend you check out.

Third, make bankruptcy your last option.  I don’t recommend this option unless all other options have been exhausted.  That being said to even qualify for this option you have to pass a means test.

This means you will have to sit down with a debt counselor and they will decide if it is right for you.  If you  pass that you can begin filing for a chapter 13 bankruptcy.  Which means you will have to pay back a certain amount of your debt.

What happens is you will be required to pay back maybe 30 cents on the dollar for one debt, 50 cents on another, 100 cents to another, and even 10 cents to others.  The point is you will not get away without paying at least paying some of the debt back.

If you would like to learn more about this option click here. Also check out this link as well if you would like learn about other debt relief options.

Chris

The post was recently featured on the Carnival Of Personal Finance by Money Under 30.

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How Pain And Pleasure Effects You Getting Debt Free

December 26, 2008 By 5 Comments

In life their are two things that control what we do for any reason.  The first is PAIN, the things we don’t want to do and the second is PLEASURE the things we do want to do. 

Recently I was reading a great book about this subject by Anthony Robbins, “Awaken the Giant Within.”  He talks in greater length about this in his book but that entire section made me realize how much pain and pleasure have everything to do with getting you out of debt or being in debt for the rest of your life.

Today’s post is about facing your pain of being in debt to achieve pleasure by becoming debt free.

How Pain And Pleasure Control You And Your Debt

Pain and Pleasure all happen because of one reason, a decision, and that decision either leads you down a road of pleasure or pain.  However here is the problem.

We as human beings are geared towards pleasure.  Everything we do is to stay away from pain.  However is it always the right way to do things?

Although, we are looking for the easy way out especially when it comes to getting out of debt and in the short term things may look good but in the long term we may face some even bigger challenges.  Getting debt free is all about associating pain and pleasure the right way. 

Here’s a simple example about what I mean.

Lets say you don’t like to brush you teeth because in the morning your to tired or at night before you go to bed you just want to go to bed.  Now in the short term you have gained pleasure because your to tired to brush your teeth but in the long term you may cause some even bigger challenges for yourself by not brushing say tooth decay, a root canal, or worse dentures. 

So just cause you take the short term pleasure doesn’t mean their will be some long term consequences.  Now let me give you an example of how this might happen if your trying to get out of debt.

Lets say you want to put a debt plan together so you can finally get on the right track, but this month you have some unplanned bills coming through and you decide to wait until next month.  You literally talk yourself out of it for that month and decide I’ll do it later and then another month goes by and another month till finally you have so much debt that you have to get into a debt counseling program, or a debt negotiation program, or worse file for bankruptcy.

Again you pushed off getting a debt plan together something you could have done on your own and now you need to take more drastic measures.  All because you decided in favor of the short term reward and not the long term pleasure. 

Does this sound like you? 

How To Use Pain And Pleasure To Get Debt Free.

The simplest way to get debt free is changing the way you associate pain and pleasure.  For example if associate just trying to forget about your debt problems that mean you are associating pleasure for not setting up your debt plan.

However if you would associate thoughts of, ”if I don’t setup my own debt plan now I will have to go into a debt negotiation plan or worse bankruptcy,” you would associate pain with not setting up the debt plan and do it immediately.  Then every time you think it’s a pain to get out of debt you can think of the long term pain it would cause you.

Though this may come at a great cost to you.  Sometimes before most people take action is when it’s to late.  It’s finally come to the point that you must do something or their will be a big price to pay, say foreclosure or bankruptcy.  The pain has dramatically increased and now you need to do something or else. The pleasure of putting it off is not their anymore.  This is when most people decide to act however you don’t have to wait till it comes to this. 

So you might be asking how get started? 

Their are plenty of ways to do so but finding an inspiring and moving way would be the best.  For example if you know someone or people who’s in bankruptcy or even better homeless visit them and think about how life would be if you didn’t get your act together.  Seeing someone going though this kind of pain can have a huge effect.

I once heard of a guy who didn’t want his kids to do drugs and wanted them to learn why they shouldn’t take drugs and the effects they can have on you.  So he knew of a place where they rehabilitated drug attics and decided take his kids on a tour of the place.  The sites were unspeakable.  Though terrible it worked.  The children’s fear was permanently ingrained in their thoughts and every time someone tried to offer them drugs the images of those people going through rehabilitation came to mind.

The mind is a powerful force.  In the end setting up a debt plan may cause you to endure a little pain but it’s minimal to the pain you could potentially face down the road by just giving up a little pleasure now. 

Want to save yourself form financial pain sign up for my RSS and get back on track today.

This post was featured in the Money Hacks Carnival by Cash Money Life.

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The Pros And Cons Of Getting Debt Free Yourself – Part 1

September 15, 2008 By 8 Comments


Can you do it yourself?

Out of all the different ways we have been talking about over the last few days, getting debt free yourself will probably be the first option most people try.  Simply for a few reasons.

  • It cost you nothing to do it yourself.  Other than just paying the debt off.
  • You don’t have to qualify for the program.  It’s your program.
  • Finally, you can do it how you want to.  You have complete freedom of how you want to get debt free.

How do I get debt free?

This is the biggest question people consider when they want to get debt free.  Some will just pay minimum balances on all there accounts or apply a little extra to every account thinking it will save me more than if I just made the minimum payment.  Along with that doing some tough budgeting to apply more money to your debts.  But does this work?

However this may seem like a great way to go about getting debt free but there is a difference in getting debt free just by doing some strict budgeting or actually putting a plan together.  This plan is in known as the debt snowball plan.  You may have heard of people like Suzie Orman or Dave Ramsey talk about this.

How does the debt snowball plan work?

The plan is actually very simple.  Although once you impliment it you must stick to it.

1.  Agree that you won’t stack up more credit.  If you keep adding to your credit cards or any other debt then getting debt free will not actually work.  You must stop using your credit.  You must also stop creating new credit as well.  No new credit cards.

2.  Gather all of your current debts.  Get all of your credit card bills, HELOC (Home Equity Line Of Creidit),  car loans, personal loans, school loans, and mortgage bills together.  Include all debts not just the ones with higher balances. 

3.  Line your debts from lowest to highest balance.  This order is how you will pay off your debts.  Some will say pay off the highest interst cards firsts.  I disagree.  Order them from lowest to highest ballance this way you will see progress right away in the plan.  Also put your mortgage last to pay off.  The reason being there are some great tax benifets to your mortgage as apposed to your credit cards.  Also credit cards will usually have higher interest rates.

4.  Pay the minimum payments.  Pay all the minimum payments on all of the debts except for the one with lowest balance.  The debt with lowest balance you will pay the minimum payment along with an extra $50 to $200.  Whatever you pay extra keep it the same.  Don’t add or subtract any of the extra that you pay.  So if you apply $100 extra always keep it at $100.

5. Continue to pay this until you have the first debt payed off.  For example if your first credit card balance is $1000 and the minimum payment is $50 then pay the minimum plus an extra $100 or whatever you choose to pay extra.

6.  Celebrate!  This is a very important step that most skip.  Celebrate that you have paid off a debt especially your first one.  You don’t have to do anything big.  Maybe you go out to eat at a nice resturant, take the kids to the zoo, or go see a movie.  Have some fun with this.  Getting debt free doesn’t have to be a drag.  It can be fun too.

7.  Start paying off the next debt.  Start paying off the next debt with the next lowest balance except this time add the $100 that you are paying extra plus the $50 you paid on the previous debt along with the minimum balance you are paying on the current debt.   Do this until the debt is paid off.

8. Celebrate again!  Obviously you know why this is important from reading step 6. 

9.  Pay off the next debt.  Again start paying off the debt with the lowest balance and add the $100 extra payment along with the minimum balances you paid on the previous two debts. 

10.  Celebrate again!  Again you know the drill. From here just keep on repeating steps 9 and 10.  Once one is paid off continue on to the next debt with lowest balance applying all the minimum payments plus the extra $100.

You can see how this will eventually begin to escalate to the point where the only debt that is left is your mortgage.  Then with all of those minimum payments you were applying to your credit cards along with that extra $100 you will have that mortgage paid off in now time at all.

I’m debt free, now what?

Once you are debt free start saving the money for an emergency fund.  Save six months worth of expenses in some sort of savings account for emergencies only.  This way if sudden expenses do come up they won’t dig you deeper into debt.

After you have an emergency fund established save the rest back for retirement and possible college savings for your kids.

Last but not least take action.  This is the only way you will solve the problem.  If you wait you to long you may have no other choice but to consider debt negotiation, consumer credit counseling, or worse bankruptcy.  Do let that happen to you.

Start Now!

Finally, are you using this method to get debt free?  Are you interested in doing this program?  What are your concerns?

Read part 2 of getting debt yourself to learn the pros and cons of this program.

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The Pros And Cons Of Debt Negotiation

September 12, 2008 By 1 Comment


How debt negotiation works.

Debt negotiation may sound a lot like consumer credit counseling but they are different in many ways.  With this type of program an individual is assigned to you to go out and actually talk to your creditors and negotiate on your behalf to settle your debt much sooner. 

In fact you must qualify to even be in the program.

  • You must demonstrate a hardship.  Whether this would be a loss of a job, a foreclosure, or even an injury that has laid you off work for a while you must be facing a hardship.  The point being you must show that you can’t solve your current financial situation and you need help.
  • All debts must be unsecured.  So an account that is secured will not be excepted.  Other debts that won’t be excepted are Public utilities, student loans, Military accounts, MAC Tools, Payday advances,  and federal credit unions.  Although business deficiencies may be included.
  • All accounts must be greater that $500 in order to be excepted and if they are over $500 and unsecured they must be included into the program.  Also depending on the company they usually want a minimum of $10,000 of total debt in the program all together. 
  • While in the program you can not use your credit to obtain unsecured credit cards.  This is done so you don’t keep piling more debt into the program. 
  • People who have declared Chapter 7 bankruptcy in the past 3 years will usually not be excepted in to the program. 
  • Any 0% credit card accounts usually won’t be excepted into the program until the 0% time frame is up.

If you don’t meet any of these criteria you will not be excepted into the program.  So if your looking at this list above and you aren’t in a hardship this is not a program for you. 

So what are the advantages and disadvantages of debt negotiation?

Advantages

1.  Protection from creditor harassment.  If you are receiving a lot of calls from creditors they will pretty much stop right here.  Which is great because it will keep you from those negative call that keep you up at night worrying about those bills.

2.  Debt is reduced.  Usually the total unsecured debt is reduced by 40% to 60% over a period of 2 to 3 years.  In a lot of cases saving you a lot of money in interest payment you won’t have to make. 

3.  Improves credit ratings.  As you pay off your debts while in the program your credit rating will start to improve.  This will improve your credit much faster that bankruptcy which takes 10 years till it is off your record.

4.  Developes a savings habit.  If you aren’t a good saver this program will help you do so.

Disadvantages

1.  Credit rating can be affected at first.  If you are coming current with accounts you may experience a drop in your credit.

2.  Accounts settle individually.  As the funds accumulate the money will pay each debt off individually.  This will cause a bad credit rating as an effect.

3.  May seek legal remedies.  If the creditors aren’t getting payed they may choose to get the lawyers involved and take you to court to get there money.

If you are facing a tough hardship and have been thinking about bankruptcy you may want to consider this option first.  This option can save you a lot of money versus paying a lawyer to do a bankruptcy.  Debt negotiation is usually much cheaper.  However make sure they have the proper accreditation’s and that they aren’t some fly by night company.

Finally are you thinking about going through a debt negotiation program?  Have you ever been through this type of program?  What are your thought on it?  Was it worth it?  If you haven’t been through a debt negotiation programs what issues are you contemplating about?

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5 Ways To Get Debt Free

September 8, 2008 By 2 Comments

Of all the ways to get debt free I have decide to spend a week discussing the different way to do so.  Also I will be discussing the pros and cons of each option.  A lot of the problem of getting out of debt is knowing really what options are available to you and which will help you the best for your situation.

1. Bankruptcy.  Is this the best route?  Sometimes it may be others it may not. 

2. Debt Consolidation.  This is a technique where you combine you current debts into one and make just one payment usually to get a lower interest rate.  A lot of people will usually combine everything into there home loan.

3. Consumer Credit Counseling.  This option allows you to work with an individual to get debt free.  I think of it like a debt coach. 

4.  Debt Negotiation.  This option is where you higher a company to go out negotiate your debts for you helping you cut your interest rates.

5. Do it yourself.  This option is the least costly of them all and allows you to employ tactics such as snowballing.  However just because it’s the cheapest doesn’t mean it’s the easiest.

Out of all 5 of these options they all have there up sides and down sides.  This will be the discussion as the week unfolds.  However knowing your options is just part of the process doing them is a whole other. 

If you are considering any of these options you may want to read these articles before you decide.  In the end you may decided it may be simpler to go with another option first.

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