dealing with credit card debt

June 18th, 2008

My name is Joe Sellers and I’ve been helping those that are in debt with their credit cards and other unsecured debt for a while now and understand the complications it causes in their life. When you have credit card debt and believe that the situation is no longer in your hands, you would be smart to make a decision and make it as soon as possible. You should not put it off until it is too late. As the majority of you probably now already know is that the debt collectors are not helpful when you contact them with issues with billing. When you first obtain the card they are the politest people while you are speaking with them. Then if you call them to complain about a late or over limit penalty fee and attempt to have it reversed they completely do a 180 and very rarely they may let you off once a year, if you are lucky. When it comes down to it what choices do you have? It’s not like you can stop paying your rent/mortgage or other necessities for you and your loved ones to survive.

The credit card companies made over 17 billion dollars in penalty fees last year and it will be a lot higher this year. Now I am pretty sure that it has happened to you at some point, where you go and open your credit card statement only to find out that your APR has almost doubled or even tripled. It is bad enough to try and keep up with 9.9% or even the 7.9 % interest that they are charging on your credit cards. How are you supposed to pay for the new payments now? It was bad enough to manage before the interest was raised. This is why many Americans are searching for other options such as debt settlement vs. credit counseling, or bankruptcy. If you are not familiar with any of your options then I will give you a little information on them.

Bankruptcy

Before 2005 bankruptcy was to be used for families who were going through serious financial hardships. Regrettably it was abused by far too many debtors who wanted to avoid paying their credit card debts. They did not want to be accountable for their misgivings. The credit card industry was sick and tired of this so they pushed to have the bankruptcy laws updated. It is now known as the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. It would make it much more of a task for many debtors to file for help. Bankruptcy should only be made use of as your very last choice after you have considered every conceivable option. Also you should think of the negative aftereffects that very well might come back later on down the road. You would have to locate an attorney, go to court and that could cost you a substantial amount of your hard earned income. There is also the matter of it being on your FICO report for a long time. When you are signing any important application or document you by law have to say yes when inquired about your previous bankruptcy, so this does have a very negative long lasting effect on your ability to obtain future credit.

Don’t be mislead

Over 80% of the companies you see on TV, internet or hear on the radio are not the companies you will be actually working with. They are lead brokers that sell your information to other companies, that is why when you call they tell you that an analyst will contact you back shortly because they are all dealing with other clients. If you fill out the application over the internet you should get a call from that company that day or at latest the next day and not some other company. So you need to remember with who and where you requested the information

Credit counseling

In each direction you turn, either it is advertised on the radio or television, you will hear about consumer credit counseling. A credit counseling company will attempt to get the credit card companies to lower the APR on your credit cards. You then make one monthly payment to the consumer credit counseling company and they then pay each one of your creditors on your behalf. The down fall to this choice is even though they lower your interest rate on your credit card accounts you might still pay back as much as 125% of what you currently owe.

This is because joining this sort of agenda you will still be paying back what you owe plus some of the interest for around 4 to 7 years. Almost 50% of the consumers that are in these programs don’t graduate from the program for missing as much as one payment. Another drawback to credit counseling is that if you have a income problem and are miss your monthly payment they will boot you off of the program right away. They will also raise your interest back up and the creditor could keep you off the program for a minimum of one year and on some occasions even longer. This might put you right back to where you started from, if not in a worse situation.

Debt Settlement

This is the option which can save you the largest amount of money. If you find competent credit card debt settlement companies you will save at least 40% of what you currently owe. The 40% should include all of their fees. The same with consumer credit counseling, you will hear a lot of radio and television advertisements very frequently. These organizations are popping up everywhere across the United States. Some of these companies try to make it sound like they have a magic stick and are going to make all your debt vanish very easily.

There are even many companies that try to use religion to gain the trust of debtors. Whichever organization you are going to hire it is your responsibility to due diligence on them. You should start with the BBB (Better Business bureau). You will be able to discover quite a bit about a company from the Better Business Bureau. If you see that a company has only been in operating for a short time and has a slew of complaints towards them, then you must avoid them. Another thing to keep an eye out for is how much time has the company been around. Some organizations only survive a short time before they go out of business or get caught stealing people’s hard earned dollars. Then some of them only stick around to make as much money as they can and close shop just to open up right next door a few days later.

Joe Sellers is a debt analyst and researcher

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Filed in Education, Finance, General

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