Most Americans of today carry a credit debt of some $38,000 or so in the form of Credit Card Dues, Automobile Loans, Mortgage Payments, and other loans.
And most of them are having trouble meeting their monthly financial obligations.
There are many methods of handling your debts like debt consolidation, debt settlement, etc. and also a way to get your credit card dues written off legally.
Debt Consolidation is nothing but getting a fresh new loan and paying off all your smaller debts like medical bills, credit card dues, grocery and department store dues, etc.
These are the small unsecured debts. The new consolidated loan is usually a secured one with some of your property as collateral against the loan.
The monthly dues on this loan will usually be less than the total payments on the unsecured loans and will help save a sizeable amount.
Debt Counseling is where an experienced counselor will go over your income and expenses and prepare a budget. You will be required to sell some luxury assets like an additional car or a boat and advised on cutting down expenses.
This kind of counseling is given for both profit and non-profit companies. The money from the sale of your assets goes to the payment of some of your debts including credit card dues.
The debt counselor or the counseling company liaisons between you and your creditor and arranges all the transactions and takes a fee for the services rendered.
Debt Settlement is the art of negotiation with your creditor and persuades them to take a lesser amount than you actually owe in full settlement of your debt.
There are firms that will do the negotiating for you or if you are confident and know the ropes you can do-it-yourself.
The negotiator or the negotiating company takes a percentage of the amount by which they got the debt reduced.
Another method is to try to modify the loan. This is called “Loan Modification”.
Here an attempt is made to either reduce the rate of interest or make a modification in the tenure of the loan or reduce the principal amount or a combination of two or three of the above depending on the circumstances and the creditor’s willingness.
Your budget is prepared thoroughly with necessary cuts in unwanted expenditure. This method is usually adopted in the case of mortgages so that the homeowner does not lose his home.
Filing for bankruptcy is the last and final option for getting out of your debt. If your bankruptcy application is approved by the court, you are not responsible for your debts any longer.
The court will order that your assets be sold and the debts cleared off. At times the court may not decide in your favor and you will have to resort to other methods of debt settlement.
But filing for bankruptcy is fraught with a lot of difficulties and your credit history and your financial future is destroyed.