Credit card debt can be debilitating. When your bills are more than you can handle and you are struggling to get by, debt relief options can help. However, it’s important to understand that there are various forms of debt relief, and they are not all right for everyone.
If you are drowning in debt but aren’t sure which option is right for you, it can help to consult with an experienced lawyer. At Sawin & Shea, LLC, our attorneys have years of experience helping clients find relief from credit card debt. We can help you file a Chapter 7 or Chapter 13 bankruptcy, or we can point you in another direction if bankruptcy is not right for you.
Let’s take a look at some of the various types of debt relief available for those struggling with credit card debt.
When you are buried under mountains of debt, it’s understandable that you might jump at the first solution that you come across, but it’s important to consider all of your options. Each of the solutions below has its benefits and drawbacks, and they should be considered carefully before you make a decision.
Debt relief programs or debt management plans are very common these days. Typically, these programs enable you to pay off all of your credit card debt in full, but through a single reduced rate payment. Debt management programs are run by credit counseling agencies that handle negotiations with your creditors to create new terms. The single payment you make through the program is then distributed to your creditors by the credit counseling agency. They are for profit businesses that can charge significant fees. They are not regulated by any state or federal agency, so they are free to market to you in any way they see fit. Some are less than truthful about the benefit they provide.
While these programs can offer relief, it’s important to note that they still have a significant effect on your credit score. The plans or programs themselves do not damage your credit, but generally, all of your credit card accounts will be closed through the program and payments will be marked as late. Those ongoing late payments is what can kill your credit score. You should also be wary of debt relief scams. A lot of debt management and relief programs today are run by scammers. Also know that there is no legal protection from creditors in a debt management plan. If a creditor does not want to participate, they can still pursue you in all the ways allowed by law including lawsuits and wage garnishments.
Debt settlement is an option, but it should be the thing you consider last because it generally requires you to default with your creditors first. When you stop making payments and default, your account will be sent to a collection agency that may be willing to offer you a settlement that is less than what you actually owe. However, this requires that you have a large lump sum available to pay the settlement, as they do not offer a payment plan.
This can be a good option if you have enough money saved up to provide a lump sum payment, but generally, this is not the case. If your account defaults and goes to collections and you still can’t pay, your creditor can take legal action against you. Even if you are willing to come to an agreement on a settlement, this can take years, and your credit will continue to get damaged from the payments you continue to miss.
Consolidation loans are an option if your credit score is still in decent standing and you have the means to make payments but simply need a consolidated payment or a lower interest rate. There are many lenders out there that offer consolidation loans that allow you to pay off all of your creditors and simply combine the debt into one loan, with one lower payment and a reduced rate. But again, this generally only works if you still have good credit and make enough money to make the payments that will be asked of you. Further, you can’t borrow your way out of debt. You are simply trading debt in one form for debt in another.
Balance transfers are another do-it-yourself option similar to consolidation loans. In this situation, you would open a new credit card that offers better interest rates and potentially other benefits and transfer your debts from your other creditors. You can do this by opening just one new card and transferring all of your debt so you can have one payment, or you can open a couple of new accounts to make the transfers. However, just like loan consolidation, you will need a decent credit score to do this and should read the fine print before opening any new accounts. Not all credit cards are as great as they appear. Fees for doing this can also be significant. Also, if you do not pay the debt off in the prescribed term, a big bump in interest rates will take effect.
If you are struggling to make payments and your credit score is low, bankruptcy might be the right choice for you. Before making any decisions about how to handle your credit card debt, you should consult with a bankruptcy attorney. They can offer you guidance and help you understand your options. If you do choose to file bankruptcy, you could potentially have all of your debt discharged through Chapter 7, or a Chapter 13 bankruptcy can force your creditors to accept much lower payments based on your financial situation. Bankruptcy also offers legal protection from your creditors in a system with court oversight and built-in consumer protections.
For more information about debt relief and bankruptcy, get in touch with the attorneys at Sawin & Shea today. We believe in providing compassionate and understanding representation to those struggling with debt. Our experienced attorneys can help walk you through the bankrutpcy process every step of the way. We can even offer guidance after your bankruptcy case has ended.
Contact us at 317-759-1483 or send us an email for a free consultation today!