Banks and credit card companies promise an easy fix to these problems. Just charge the debt and pay in small monthly payments over time. But a few words of caution. THE BANKS ARE NOT ON YOUR SIDE! Take a very close look at your credit card agreement. Look carefully at the fine print. You may need to get a magnifying glass to read it, but it's there. A very nasty clause that states how your interest rate will jump from that comfortable 9.9% to 28.9% if you miss any payments. They actually love it when you miss a payment because this is how they make their money. You need to be armed with knowledge to get yourself out of debt.
There are several legal ways to solve your debt problems. The top five are:
1. Debt Roll-up
2. Debt consolidation
3. Credit counseling
4. Bankruptcy
5. Debt Settlement
Debt roll-up is the system that you can implement yourself by determining how much extra money each month that you may have to apply to your debts. Then listing them all and taking one debt at a time, apply the extra amount to that one debt until it is paid off. Then repeat with the next debt on your list. This system takes discipline and time.
Debt consolidation is securing a loan, usually a second mortgage on your home, to pay off your debts. The drawback of this is that you will end paying for the debts for a longer period of time and if you decide to sell your home, you must pay off the second mortgage also.
Credit counseling is contacting an agency to negotiate payments to your creditors for you. Once the payments are negotiated, you pay the agency one lump sum a month and they divide it among your creditors for you. Choose a credit counseling agency wisely. Never pay a huge up front fee and make sure you check them out with the Better Business Bureau. Some people are successful with the counseling agencies.
Bankruptcy is filing a petition in court that you are having financial hardship and will be unable to pay your bills. Filing bankruptcy has become more difficult due to the new laws passed in 2005. It is also more expensive. If you are truly broke and can prove it, bankruptcy may be the way to go. But it should be a last ditch effort.
Debt settlement is when you contact your creditors and agree upon a reduced settlement amount. For instance, if you owe $2000 on a credit card and have been unable to pay the monthly payments for a time but are now in better financial shape, you make call the card company and ask what amount they would take for a settlement to pay it off and close the account. Obviously, you will need the money to able to do this. Most credit card companies want that amount within 30 days.
Those are the options that you have for legal debt elimination. Be wary of scams that claim they can wipe out your debt for you for a fee. Do your research and stop letting the big guys take advantage of you. Follow these ideas for a debt relief plan.
