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Debt Consolidation for a Homeowner

(And still keep my home!)

Credit Crisis

Millions of Americans are burdened by intolerable amounts of credit card and other unsecured debt. The average American carries 8 credit cards and has an average credit card debt of $5,434. From the lowest average credit card debt found in Iowa $4,139, to the highest in Alaska at $7,328, and with many families having at least two individuals carrying cards, household debt is likely closer to eight to ten thousand. And with roughly half of the cardholders paying their bill in full every month, that suggests a lot of families with no credit card debt, and others with around $18,000.

How do I compare with the trends?

TransUnion's quarterly analysis of trends in the credit card industry revealed that the national credit card delinquency rate has gone down a little. TransUnion has a one-of-a-kind database consisting of 27 million anonymous consumer records. Ezra Becker is the director of consulting and strategy in TransUnion's financial services business unit, and has this to say, "To a large extent, this (decline in credit card delinquency) is due to the fact that falling home values have motivated consumers with negative equity to walk away from their mortgage debt obligations in order to remain current on their credit cards. This is a fundamental shift in consumer behavior."

According to mybanktracker.com there are many reasons why credit card debt levels have been dropping during the recession, one being simply that customers are spending less money since the economic downturn. However, this is more specifically targeted at credit cards because people are worried about their credit limits. With a high unemployment rate and economic uncertainty, consumers don't want to risk damaging their credit, which could help them get through a period without a steady income.

Another reason why debt has gone down is that credit card companies have been less forgiving to their customers with high debt, and have been getting rid of high risk customers left and right, and denying credit card applications to people they aren't sure about. Furthermore, the new legislation is making everyone a bit nervous.

Historically, the home equity loan has been the dominant choice for unsecured debt consolidation. Most people would rather pay their bills if they can, even if it does mean trading an unsecured debt for a secured one, and creating a big risk that does not resolve their debt. Unfortunately, those who can still qualify for such a loan probably don't need it. If you do happen to be one of the few that fall into this niche today, first check the available rates at your bank, then get in touch with us to see if our contacts can better their rates. We would like you to find the best deal there is.

I'm having a rough time getting a loan at this time

Since you are reading here, it is more likely your quality of life is being affected by your debt situation and you've either been turned down for a loan, or you've been thinking about a bankruptcy. This is when to consider a debt management company that helps consumers deal with their frustration.

There are basically three solutions here short of bankruptcy: doing nothing other than pay minimum payments until you can't for the next thirty years, Consumer Debt Counseling which consolidates your bills into one monthly payment with possible lower interest rates and fees while taking three to seven years to pay down your full balance, and Consumer Debt Settlement which allows you to typically end up paying only 30% to 70% of your outstanding balance. Since doing nothing is absurd, let's look at all three, but focus discussion on the pros and cons of both Consumer Debt Counseling and Consumer Debt Settlement.

Pay Minimum (Do nothing)

  • Interest can range from as low as 0% to as high as 30% and creditors can raise rates at any time.
  • You'll pay nearly 50% of your original balance in interest alone over the first 3 years. And you are not making a dent on your principal balance.
  • If your interest rates are 25% or higher, it is practically impossible to pay off your debt by making minimum payments. Credit card companies have it set up so that it will take you over 30 years to pay off your debt unless you pay something towards the principal. Furthermore, with your cards maxed out, no one will allow you additional credit.
  • If you've already stopped making payments, you are destroying your credit while not resolving any of your debt in the process.

Consumer Debt Counseling

  • Debt Counseling Programs* are generally funded by the credit card companies themselves as the intent is to help you pay back your debt in full. They like that. These programs are advertised all over the place, and some are better than others.
  • Consolidates your bills into one monthly payment with possible lower interest rates and fees.
  • Your balance will often take 3-7 years to pay down.
  • Some creditors will "re-age" delinquent debt to show no longer past due after a series of successful in program on-time payments have been made.
  • You'll end up paying back your full balance plus some interest.
  • If you miss multiple payments you may be subject to paying back past interest at your prior to program rates.
  • This is often viewed by lending institutions as similar to Chapter 13 Bankruptcy.
* Beware of debt counseling companies charging fees and masquerading as debt settlement companies.

Debt Settlement Program

  • Debt Settlement Programs are consumer driven and not affiliated with your creditors. The results you get are focused in the consumer's interest, not the lender's.
  • Debt Settlement is a relatively fast way to resolve your debt.
  • Fees are spread out over time, usually 12 to 24 months depending on the length of the program.
  • Your debt is paid off in anywhere from 18 to 48 months depending on cash availability.
  • You will receive an 'open delinquency' on your credit until the debts are settled.
  • Everyone wins, including you. The lender gets the bad debt off their books, and you pay less.
  • You may typically end up paying only 30% to 70% of your outstanding balance.*
* Individual results will vary and are based on successful completion of the program and your ability to save funds. A Debt Settlement Program does not assume or pay any of your consumer debts for you, they manage your funds and distribute what you pay and do not provide legal or tax advice. Debt Settlement Programs are not available in all States. Always read and understand all contract terms prior to enrollment in any program. Feel free to contact us with questions.

We will recommend a company that tends to negotiate a typical debt payoff amount in the neighborhood of 40% to 50% of your outstanding balance. (What that means is that if you have $10,000 in debt, you will likely only have to pay around $4,000 to $5,000 of it.)

Reaching out for help is never easy when you're in debt. We recognize the fear you are going through. We're consumers also! We know being in debt and trusting the right company can be tough so we will do whatever we can to be as informative as possible and help you and your family with some smart and affordable planning for your financial situation.

We know the credit and collections industry very well. We know its cycles, its internal policies and procedures. To make the best of your financial situation now and in the future, it's important you find a company with the right people, the right technology and experience to successfully represent you, a company that understands the difficulties and challenges you're facing.

Consumer Debt Counseling

In a Debt Counseling Program, a professional counselor will help you establish a debt repayment plan with your creditors, often at reduced monthly payments, reduced fees and reduced interest rates. The Debt Counseling Program offers both greater affordability and convenience in that the consumer makes one singular payment to the service provider. In turn, they disburse all payments to the creditors on a monthly basis as well as manage the ongoing relationship with each creditor.

The objective of a Debt Counseling Program is to pay back the balance of your debts in full. However, by negotiating an effective debt management program, the consumer ideally saves money on a monthly basis due to lowered monthly payments and may save significant money over the long term as a result of reduced fees and interest rates.

Debt Settlement Program

If you can qualify for it, our recommendation is to take advantage of a Debt Settlement Program because it is relatively quick, with the least expensive payoff, and it is the most effective compliment to a successful home loan modification (if you are considering one,) since it further lowers your monthly cost of living.

Debt settlement is different than debt counseling in that the end goal is to have the creditor and consumer agree to settle the debt for 30% to 70% of what was originally owed depending on performance capability. The primary goal is to save you money and is intended for people who cannot afford to make the monthly minimum payments on their credit cards and still meet their necessary living expenses. Most creditors are willing to accept payment for less than the full amount as an alternative to the consumer filing for bankruptcy, in which case, the creditor may get nothing.

In Debt Settlement you make a singular Debt Settlement Program payment into an FDIC insured savings account. When sufficient funds have been accumulated, those funds are, essentially, put out for bid and negotiation with the various creditors in order to execute a settlement. Accepted and executed settlements free you of that debt forever. Resolving you're debt is the first step to becoming financially secure, and a Debt Settlement program may be your best option.

Our preferred debt settlement program is designed for people who have had a severe financial hardship and want an alternative to filing bankruptcy. However, before you make any decisions we strongly recommend that you read and review all of your options. You may also want to check out the Debt Management FAQ.


Debt Settlement is a hardship program. It is only for people who:

  • Have a financial hardship.
  • Are late paying their unsecured debts.
  • Have no ability to make payments in the future, as currently structured, without negative cash flow.
  • Bankruptcy is their only other choice.
Examples of qualifying hardship are loss of income, medical emergency, death of a family income earner, divorce, and increased interest rates and/or minimum payments to the point of creating negative cash flow.

If you are currently meeting your monthly debt obligations and can continue to do so indefinitely, then a Debt Management program is NOT for you. See other options.



Learning How To Fight The Collector

If you are being harrassed by a debt collector you are not alone.

Steven Katz is known as a "credit terrorist." For years, he has run what he calls the Steven Katz School of Bill Collector Education. He runs a free Web site called Debtorboards.com, where people share tips on topics like keeping a paper trail and recording calls from collectors.

Mr. Katz, a 60-year-old accountant in suburban Tucson, spends his free time schooling debtors on the finer points of consumer protection law to help them turn the tables on debt collectors. On occasion, he thumbs his own nose at them too.

A former bill collector himself, Mr. Katz rebelled after a debt buyer damaged his credit score with what he says was a bogus bill. Mr. Katz sued, and in 2003 he collected his first damage award, a $1,000 check that he now keeps framed behind his desk.

"The bill collectors, when they call, make you feel like the only option you have is to lay down and play dead. That's not true," said Mr. Katz said, who does not charge for his advice. "Nothing validates this more than getting a check."

Stop Debt Collectors In Their Tracks

Under debt collection laws, you may be entitled to money damages and payment of your attorneys' fees, if a debt collector has violated the law.

You have the right to stop debt collectors from harassing or abusing you.

Yes, the law protects you against unfair and coercive debt collection methods!

A debt collector cannot:
  • Telephone you an unreasonable number of times
  • Telephone you at an unusual time/ unusual place
  • Disclose information of your debts to third parties
  • Use profane or other abusive language
  • Contact you after written notification that you do not want to be contacted any further
  • Claim to be affiliated with any governmental organization
  • Misrepresent the character, amount or legal status of a debt
  • Threaten to take any action that cannot be taken legally
  • Accuse you of having committed a crime
  • Threaten or communicate false credit information
  • Attempt to collect, until he honors your request to validate
  • Use deceptive methods to collect debts
  • Call you before 8:00 a.m. or after 9:00 p.m.
  • Call you, but not announce who he/she is
  • . . and more
You can:
  • Reduce or completely zero out your interest payments
  • Avoid or reduce late payment fees
  • Combine several loans into a single payment plan
  • Get a single, low monthly payment to clear all your creditors
  • Get errors in your credit reports rectified
  • Get invalid or time-lapsed entries in your credit reports removed
  • Get peace of mind
  • . . and more

The Federal Fair Debt Collection Practices Act was enacted to stop abusive, deceptive, and unfair debt collection practices by debt collectors. If you believe you have been the victim of unfair practices of a debt collector, you may want to contact an attorny for an evaluation of your debt collection issues.

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