Consumer credit debt can range from the credit cards you carry in your wallet to the mortgage you used to buy or refinance your home. Most consumer debt relief programs are provided by private companies, which help people in working with their creditors and debt collectors to reduce or get rid of their debt. Legislation exists for consumers seeking debt relief, but whether you can use government help or need a private company depends on your situation.
Debt Consolidation
One of the most popular consumer credit debt relief resources that consumers turn to are debt consolidation companies. A debt consolidation company can also be called a credit counselor. These companies negotiate lower payments and lower payoffs with creditors on your behalf. Once the debt consolidation company negotiates the terms and conditions for you, it acts as the servicer, collecting one monthly payment from you and paying your creditors. However, the Federal Trade Commission warns of potential pitfalls from working with debt consolidation companies. Some consumers have said they were charged high fees for debt consolidation services that were not provided; that they paid an advance fee to receive a consolidation loan; and that they paid a fee for credit repair, when consumers have the right to remove inaccurate information from credit reports for free.
Mortgage Debt
Congressional legislation such as the Mortgage Forgiveness Debt Relief Act, which was passed in December of 2007, lets homeowners work with their lenders for mortgage modification. A mortgage modification is when a lender changes the terms on an original mortgage, to make the monthly payments more affordable. The Mortgage Forgiveness Debt Relief Act allows homeowners to exclude personal cash reserves or income in determining whether they are eligible for mortgage modification.
Fair Debt Collection Practices
Another federal act that deals with consumer credit debt relief is the Fair Debt Collection Practices Act, which gives consumers relief against debt collectors. The act prohibits debt collection agencies from harassing consumers to repay their debt. For example, the act sets the 8 a.m. to 9 p.m. as the hours that a debt collector may contact a consumer. The act also provides consumers the right to ask debt collectors to stop contacting them. When the request is made in writing, debt collectors have to honor it.
Renegotiate
For consumer credit card debt, one of the first places you can turn for debt relief is to the credit card issuer. Although it might be challenging, it is possible to work out terms and conditions with your credit card company to make your payments more affordable. Negotiating with credit card issuers is usually a multistep process that takes time, but with persistence you can at time acquire better terms, lower interest rates and a reduced balance.
Bankruptcy
Although filing for bankruptcy protection should be a last resort, filing for Chapter 7 or Chapter 13 (for personal debt) might be the ultimate in debt relief. Chapter 7 liquidates assets to pay off your debt. Chapter 13 is an option to get rid of your debt, but you still retain your assets that you can afford to make payments on.
Government Credit Card Debt Relief Programs
Changes in federal legislation began in 2009 and were carried over into 2010 to help credit card holders to find some relief from their credit card debt. The legislation helps consumers with three main areas. First, credit card companies are required to give credit card holders at least 45 days notice before instituting any changes to their credit card agreements. If the consumer does not agree to the change in terms, then the consumer has up to five years to pay the credit card debt off under its original agreement with the credit card issuer. Second, the credit card issuer must send the bill for the credit card to the consumer at least two weeks before the due date, to allow the card holder enough time to get the money together to pay the bill. Third, credit card companies are prohibited from changing interest rates unless the cardholder has gone 60 days without making a payment.
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