The facts about debt consolidation and the things you might not know.

Over the years various people have struggled with debt of one kind or the other. Over that span there have been various tools in helping them deal with this situation. Recently it seems that the number of people drowning in debt has increased considerably. This has brought the various debt relief programs to the forefront of our minds both because of our heightened awareness of topic and because of increased media coverage and advertisements.

For the most part many of the debt relief programs that are available to people have been around for a long time. Of course there are always those fly by night “eliminate your debt” scams that crop up then go away. For an example the idea you can go to court and threaten to sue the creditors if they don’t eliminate your debt. Beware, that is no better than snake oil and can put you in a much worse situation then what you are right now.

The debt relief programs I am speaking of are valid and legal and have been put in place to assist people in dealing with an unmanageable debt situation. But it is important to know all the details of these options and how each one works.

Being in the industry for many years I have head countless clients say they are looking to do debt consolidation. What they don’t realize is that almost all of the credit card debt relief options are debt consolidation programs.

The definition of a debt consolidation program is a plan that will allow you to consolidate all of your payments into one so that you are not making individual payments to each of your creditors. Now I understand that the way I worded it might not be exactly what you were looking for and the reason for that is that you are thinking of one particular form of debt consolidation, not the broad category.

Let me explain to you each of the debt relief options and how each one of them will help you to consolidate your debt into one monthly payment.

Let’s start off with one of the oldest forms of debt help, which is called Bankruptcy. This option has been around for many years and more recently was amended to make it more difficult to qualify for. What many people do not realize is there are various forms of bankruptcy. Most commonly thought of is chapter 7, where your debt is forgiven and you do not have to pay back anything to the creditors. This however is the most difficult to qualify for. More common is the chapter 13 bankruptcy. This is a debt consolidation program where the courts decide how much you can afford to pay on a monthly base and you pay the trustee who distributes the payments to the creditors. You could end up paying 100% of the debt and that option will be on your credit for the longest amount of time.

The next debt relief option is consumer credit counseling and is commonly thought of by people as a debt onsolidation program. This is where you hire an agency to negotiate your interest rates down on all of your creditors, then you mane one monthly payment to the agency. You end up paying back about 130% of what you owe over 5 to 7 years and the monthly payment you make is typically close to what your minimum payments were for the creditors.

Debt resolution is another option that has gained popularity in recent years. Essentially you hire an attorney or law firm to negotiate your debt for less than what you owe. You then make one monthly deposit into a trust account which is used to settle with the creditors. Since the FTC regulations that were passed in October 2010, this option has gained in popularity throughout the debt relief industry as a way to get around the regulations ban on charging upfront fees.

Many of these debt settlement lawyers will charge you a retainer to start and then charge legal fees that they deduct from each of your monthly deposits throughout the entire program on top of their settlement charges. First of all this will increase your total program cost. Second people assume that by having a debt settlement law firm negotiate their debt, they are protected more and will be able to do a better job.

The reality is that the law firm is not doing the negotiating. They sub contract debt settlement companies to do all of the maintenance and work on your account. Also, they do not protect you since they are only representing you for the purposes of negotiating your debt and nothing more! They do not represent you in court and in many cases will not even help you answer a summons should you receive one. This is evident by the number of class actions law suits and states’ attorneys that are going after these lawyer bases settlement debt consolidation companies.

The final debt consolidation program available is called debt settlement. This is where a reputable accredited company will negotiate with your creditors on your behalf and will allow you to settle for less than your full balances with your creditors. Companies that follow the regulations will not charge you any fees until they have successfully negotiated your accounts. You save your money in a dedicated account which you have full access to and as each creditor is settled with they are paid from that account.

If you would like to hear more details about all of your options then you can speak to a debt analyst with years of experience who can review your situation and give you the information you need to make the right choice. Simply fill out the short form on the right column or click the green button.

February 9, 2012

The way the Chapter 13 A bankruptcy proceeding Payment Plan Functions

With foreclosure rates continuing to increase, there has been a spark of interest in Chapter 13 individual bankruptcy. One of the main benefits of a Chapter 13 bankruptcy is a chance to catch up in back payments and sometimes even renegotiate the terms with the loan. Along with other forms of individual bankruptcy, Chapter 13 gets the automatic stay that can stop foreclosure and almost any collection activity against the debtor. When filing regarding bankruptcy under Chapter 13 the debtor’s individual bankruptcy attorney will produce a reorganization plan that is to be paid over less than 6 year period. The payment plan should be affordable to the debtor or maybe they won’t have the ability to keep up with the payment schedule and also the bankruptcy can become being dismissed. The bankruptcy trustee doesn’t desire to set a debtor up for failure and will work with a bankruptcy attorney to come up with something fair. After the payment plan is agreed upon with the debtor, the bankruptcy trustee as well as creditors, it will be approved through the bankruptcy court.

South Dakota Bankruptcy Laws

After filing regarding bankruptcy under Chapter 13, your payments will be paid to the actual bankruptcy trustee plus your first will be due 1 month after the situation was filed. Usually, since the bankruptcy attorney for that debtor proposes the first payment plan, unless otherwise told through the trustee, that’s what the payment will be. In most zones, the bankruptcy trustee will send out a letter towards the debtor disclosing every one of the payment information, including where and when to send the actual payments. Tennessee Bankruptcy Laws

In a Chapter 13 bankruptcy creditors are paid simply by priority. Secured creditors, like a mortgage loan, and all main concern creditors, such as, back taxes as well as child support installments are paid 1st. Once the trustee gets approval through the bankruptcy court, they will begin coughing up the funds that you send in good provisions of the plan. Chapter 13 plans will often have minimum payments which have been paid out towards the secured creditors on a monthly basis. Because creditors tend to be paid by main concern, many unsecured creditors don’t receive any payments before the secured and priority creditors are actually paid in entire. Many unsecured creditors must wait until the finish of the payment plan, up to several years, to see anything at all. If there is not enough funds left then they probably won’t receive anything at all. It’s common to see unsecured creditors write your debt off, instead of expecting payment. Some unsecured creditors may also attempt to sell your debt to a business collection agencies company to enable them to try to collect. This many times is the location where the violations of the actual automatic stay be given play. The new creditor attempts to recover from the debtor as the debtor is being protected through the automatic stay. Nowadays, many of all of them have gotten very aggressive even though they’ve been told that the debtor was declaring for bankruptcy. Rhode Island Bankruptcy Laws

The bankruptcy trustee will accumulate and keep every one of the payments you make before the bankruptcy court realises the chapter 13 strategy. Many times the trustee will pay secured creditors interest payments ahead of receiving the confirmation. This is as the Bankruptcy Code gives adequate protection regarding secured creditors just before plan confirmation. Since the individual bankruptcy trustee is paid by the percentage of your debt being paid out there, some districts call for the debtor to create mortgage payments straight to their loan servicer. Other districts utilize the bankruptcy trustee to pay for all payments. This is something that you should discussed with the actual debtor’s bankruptcy attorney to ensure there is simply no confusion. All in all Chapter 13 bankruptcy could be a powerful tool to use to reorganize a person’s debt while having the ability to keep their residence.

Tags: Bankruptcy, Bankruptcy Laws, Debts, Finance.