As debt reduction programs go, there are bad companies who take your money and further wreck your credit and there are good companies who help you find a way out of your debt. This might include credit counselors or bankruptcy attorneys. Then there are software programs that help you find your own way for free. Which program is best partly depends on how deeply in debt you are and how fast you need to get out.
Software Programs
One way to reduce debt is to launch your own debt reduction program with the help of a budget software. Many of these can be purchased for $30 to $60 as of 2011 and help you create a budget that shows where your finances go so you can make adjustments and put more money toward paying debts (see Resources). You may also want a debt payoff calculator such as the one you can download from Vertex42 (see Resources). This helps you figure out a plan for paying off debts such as smallest first or highest interest first, according to which one will save you the most money.
Debt Management Plans
Many organizations offer debt management plans by which the consumer gives them a monthly payment and they pay the consumer's unsecured debts. This is sometimes called debt relief, debt reduction or debt consolidation. Through these agencies, the debts are slowly reduced. Many companies that offer this service are scammers who take big upfront fees and fail to pay creditors. For this kind of debt reduction, MSN Money recommends you find an agency through the Association for Consumer Credit Counseling Agencies or the National Federation of Credit Counseling (see Resources). Their fees are low, and they are accredited by outside agencies.
Debt Settlement
As a general rule, MSN Money recommends against debt settlement. It is roughly as hard on your credit as a bankruptcy but, unlike Chapter 7 bankruptcy, still leaves you paying a lot of your debt. Debt settlement arrangements pay a fraction of what you owe your creditors. Debt settlement companies often charge around 15 percent of your original debt to settle your debts. If your income is too high to file Chapter 7 or you just decide to go with debt settlement, look at the Federal Trade Commissions guidelines on finding a company (see Resources). This included refusing to guarantee results and belonging to the Better Business Bureau. Check the BBB website for this credential; don't just believe the company.
Bankruptcy
Bankruptcy is the ultimate debt reduction. With a Chapter 7 bankruptcy, all your debts are forgiven but you must liquidate everything except those things that are exempt, such as necessary automobiles and basic household furniture. With bankruptcy you are unlikely to be able to get any credit for at least seven years. A Chapter 13 bankruptcy allows you to keep your property, but it is a kind of payment plan like a debt management plan, that gets creditors off your back but you still have to repay debts. If you choose bankruptcy, the FTC has guidelines for finding an attorney on its website (see Resources).
0 comments:
Post a Comment