Below are the ways to eliminate debt:
1) The Usual Way: Most cannot afford this but if possible, this is the best way. However, if you only pay minimum payments you can possibly pay up to THREE times the original debt amount and it may take you 50 years to do! EX. $20, 000 in debt will turned into more than $60,000.
2) Bankruptcy: Chapter 13: also known as reorganization to allow you time to pay back your debt, Chapter 13 allows debtors to keep property, like a mortgaged house or a car, which they otherwise might lose. Reorganization may allow you to pay off a default during a three-to-five-year period, rather than surrender any property. This usually costs more than our program and it may devastate your credit for 10 years.
Chapter 7: Known as straight bankruptcy, if you qualify, Chapter 7 liquidates all assets that are not exempt in your state. Exempt property may include basic household furnishings and work-related tools. Some of your property may be sold by a court-appointed official or turned over to your creditors. You can file for Chapter 7 only once every six years.
Note: Personal bankruptcy usually does not erase child support, alimony, fines, taxes and some student loan obligations. Something important to note, that unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it. Both forms of Bankruptcy will show on your report for 7 to 10 years.
3) Consolidation: The original way to consolidate is through a bank loan. This would typically need to be secured by tying it to equity like your house, car, or other property that can be repossessed. This may be a good way to get your bills in order, have one monthly payment and pay less interest. The downside is that you have just made your unsecured debt, secured. If you don’t keep up with these payments you could potentially lose whatever assets you tied to this loan. Some would say this is like “Robbing Peter to Pay Paul”- it may just make things worse.
4) Consumer Credit Counseling: (Also known as CCCS) CCCS concentrates on reducing your interest rates down. You will still pay the complete principal but you will save much of the finance fees and as a result you will now be paying down more of that you owe versus just paying the fees each month. You will pay the CCCS one monthly payment which will then be disbursed to each one of your creditors; that program normally last 4-7 years. The negatives aspects are that CCCS are reported to the Credit Bureaus as 3rd party help as well as the members rarely succeed; the nationwide failure rate is over 85%. Lenders look at 3rd party help as the same risk factor as a chapter 13 bankruptcy.
5) Debt Settlement: Debt settlement will typically reduce your total debt by as much as 60% and substantially reduces your minimum payment each month. These programs generally last 12-36 months but can be shorter if you’d like to pay off early with no penalty for doing so. Debt settlement firms use many different strategies to negotiate directly with your creditors to reduce your debt total. The initial downside is that you may have some “past dues” that show on your credit report. Some debt settlement firms, including ours, will offer a credit restoration program, to bring up your credit rating once you have completed the program.