American families are now facing more problems with debt than ever before in our nation’s history. I have seen reports that the average American household is now carrying $19,000 in debts. Just imagine, $19,000 in debts! If you had that much money in the bank, you could pay cash for a new car.
The warning signs
There are two big danger signs that you have a serious problem with debt. The first is if you have to use your charge cards to buy everyday items such as groceries or gasoline where before you were able to pay cash. The second is if you have had to resort to payday loans.
Bankruptcy as an option
Many people who have found themselves in these circumstances have turned to bankruptcy as a solution. The reason for this is that a Chapter 7 bankruptcy allows you to keep some of your major assets, including your house, automobile and working tools. The downside of filing for bankruptcy is that it will stay on your credit report for seven to 10 years, which can make it very difficult for you to get new credit or a new loan of any kind.
Charge card debt settlement
A good alternative for many families–instead of filing for bankruptcy–is called charge card debt settlement.
The way this works is that you go to your creditors and ask them to reduce your debt. You can even do this in the case of credit cards, as they are a kind of loan. When you approach a creditor, you need to make it clear how difficult it would be for you to make even minimum monthly payments any time in the near future.
In some cases, the creditor will be willing to work with you to develop new terms so you could repay the debt in a timely fashion. For example, interest charges and late fees can increase debt substantially. If you can get a creditor to lower your interest rate and waive the late fees, you may find it much easier to repay your debt. Creditors can be flexible because they know that if they refuse to work with you, you may decide to declare bankruptcy, in which case they would get nothing.
Professional debt settlement
You could approach your creditors yourself and try to negotiate settlements. However, it’s important to understand you will be negotiating with experts–people who have years of experience in debt settlement. They are very skilled at saying “no” and in negotiating settlements that are much more favorable to them than to you.
This is why many families have turned to professional debt settlement companies. These companies have counselors who are skilled at negotiating with the credit card companies and have good working relationships with them. In most cases, a professional debt settlement firm will be able to get your debt reduced by as much as 50% to 60% and negotiate lower interest rates so that you can be completely debt-free in as few as 24 to 48 months.
Choosing a debt settlement company
It’s important to choose a reliable, ethical debt settlement company. It might be tempting to sign up with the first company you come across. But you should check the company’s history and qualifications, customer complaints on forums and its testimonials from satisfied customers–just to make sure it is an honest and upright company.
The cons of charge card debt settlement
While charge card debt settlement can get you debt free in a reasonable amount of time, it’s important to understand that it will have a negative effect on your credit rating. You will probably have to stop making payments on your credit cards for around six months before your credit card companies will be ready to negotiate. And any time you stop making payments on credit cards for that long, it’s bound to have a negative effect on your credit.