Debt Relief -- Why Most Programs Have A 75% Failure Rate

Debt consolidation, equity loans, credit counseling, debt management plans, even Chapter 13 bankruptcy ? it doesn't matter which of these debt programs you're talking about. They all suffer from one fatal flaw, the number one problem that causes most people to fail at eliminating their debts through these techniques. Can you guess the problem?

It's probably not what you're thinking. It's not the fees, interest rates, or the quality of the companies behind these debt solutions. No, the number one problem with most debt programs is that they require FIXED monthly payments without exception. This major flaw is the main reason that very few people make it through a credit counseling program or a Chapter 13 bankruptcy plan.

Do you make exactly the same amount of money each and every month? If you are like most people, the answer is probably NO. It's easy to understand why. Salespeople, for instance, often experience ups and downs based on how much commission they earn from one month to the next. Seasonal workers experience boom and bust times depending on the time of the year (think retail workers getting lots of overtime around the holidays). Overtime hours come and go depending on company workloads. Part-time jobs may offer hours that vary widely from week to week. And so on.

Now, what about your expenses? Do you spend exactly the same amount of money each and every month? Sure, your mortgage or rent and your car payments are a set amount each month. But doesn't your utility bill go up and down depending on the weather? What about your phone bill? How much will you spend on car repairs over the next 6 months? Medical bills? Dental bills? Can you predict such variable expenses with any accuracy?

If you have lots of room in your budget, with money left over at the end of the month, then fluctuating income and expenses are probably not a major issue for you. However, if you are struggling to make ends meet, living from one paycheck to the next, then an unexpected expense can destroy your monthly budget.

People enter debt relief programs with the best of intentions. Take credit counseling, for example. You enter a program to get some help in bringing your credit card debts under control. The monthly payment of $500 sounds good. You're humming along just fine for a few months, then wham! The water heater blows up. Time to shell out $800 for a new one. Unless you like cold showers, you'll need to skip the $500 payment to the agency this month, and part of next month's payment as well. Where does that leave you with the credit counseling program? Back on the street, that's where. You simply CANNOT miss payments into that type of plan and expect anything but failure.

Or look at Chapter 13 bankruptcy, where the court requires you to pay a set monthly amount to your creditors over a 3-5 year period. Even before the drastic new law went into effect, 2 out of every 3 people failed at Chapter 13 bankruptcy. It will get much worse under the new law, because the court will set your monthly budget for you, based on what the IRS says it should be for your state and county. This is simply unrealistic, and once people realize how bad the new law is, they will run in the other direction from Chapter 13. (Forget about Chapter 7, where you wipe the debts away. The new law will make it very difficult to qualify for the old Chapter 7 fresh start.)

Again, the big problem with most debt relief programs is lack of flexibility. You cannot call your loan officer, the credit counseling agency, or the court trustee and say, "Hey, my kid broke his leg and I had to pay the hospital $500 to cover my insurance deductible, so I'll need to skip my debt payment this month." If you could, then these plans might have a chance of working. But such inflexible programs simply do not reflect the unpredictable nature of the average household budget.

So is there any debt program that does provide this flexibility? Yes. It's called debt settlement, or debt negotiation. It's certainly not for everyone. Debt settlement is an alternative to bankruptcy. It's not for people who can pay their bills in full without hardship. But it can be a real blessing for those seeking relief from a crushing debt burden.

The reason debt settlement is so flexible is simply because YOU control the cash. You build up money in a separate savings account until you have enough to make a reasonable offer to one or more of your creditors. Like any debt program, debt settlement has its downside and its risks, but no other program provides this level of flexibility. Because the monthly payment is going into a negotiation fund that you set up and control, a bad month simply means you have less money to settle with. If you can make it up later, that's great. If not, that's life. When you have enough to settle ONE account (usually between 35% and 50% of the balance owed), then you make an offer. If your creditor takes the deal, then you start building up funds to knock out the next debt, and so on. It's the only program out there that recognizes a basic reality: Your budget should set the pace for your debt elimination program. Not the other way around!

Again, debt settlement is not a magic bullet. It won't cure every debt problem. But if you need to skip a month, or adjust up or down a little to reflect what's going on in the real world, it doesn't mean the end of the program. It's truly a shame that the financial "experts" who have set up the bankruptcy rules, consolidation loan terms, credit counseling plans, and debt management programs haven't figured this out yet. If they would just recognize this fundamental problem, then the success rate on their programs would increase dramatically and they could stop misleading the public about what works and what doesn't in the world of debt relief.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation's largest debt settlement firms, he is the author of the Debt Elimination Success Seminar?, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. http://www.zipdebt.com/article5

---

How to Choose a Debt Settlement Company

As consumer debt continues to spiral out of control, debt... Read More

5 Options Toward Debt Relief

If you are in debt, well over your head in... Read More

Personal Debt Reduction Practices

Personal debt reduction practices, the steps people take to relieve... Read More

Senate Passes New Bankruptcy Law

The United States Senate passed a law on March 10,... Read More

Dont Let The Good Times Bury You

It is vital to get rid of debt while things... Read More

What You Should Know About Bankruptcy

Filing bankruptcy is not only a last resort legal action;... Read More

Dont Drown Your Debts, Manage Them!

Are you among the millions of people who have found... Read More

Should You Join a CCCS - Consumer Credit Counseling Service for Debt Relief and Financial Freedom?

Do You Need to Join a CCCS - Consumer Credit... Read More

Debt Management - Is It the Right Choice For You?

Debt Management plans offer credit counseling clients a different and... Read More

Taking The Plunge Into Bankruptcy

Bankruptcy is one of the most difficult things a person... Read More

How To Pay Credit Card Debt Off

If you are determined to pay credit card debt off... Read More

Do It Yourself Debt Relief

With mounting bills and unforeseen hardships, you may be considering... Read More

Drowning in Debt? Tips and Tricks for Getting Out of Hot Water with Creditors

Do you, like millions of other Americans, feel like you're... Read More

Credit Counseling or Bankruptcy: Which is Best for You?

People often get to a place where they simply can't... Read More

Bankruptcy 101

Bankruptcy still remains a mystery in the eyes of many... Read More

Debt and Your Dreams

You may not realize what that credit card bill is... Read More

Bankruptcy Abuse

Bankruptcy is little more than a smack on the hand... Read More

5 Methods Toward Reducing Your Debt

Decreasing your debt is paramount to having a good credit... Read More

Credit Counseling ? Signs That You May Need Help

Credit counseling is a viable option for those who are... Read More

New Bankruptcy Law Will Not Protect You from Identity Theft

Recently passed by Congress with overwhelming support, the oddly-named Bankruptcy... Read More

Bankruptcy Your Best Bet?

Filing bankruptcy is a common practice among the U.S. Over... Read More

Credit Card Debt Freedom is Possible

Credit card debt have you drowning financially? You're not alone.... Read More

Bankruptcy As An Option

If your financial worries are preventing you from sleeping at... Read More

A History of Money and Banking Secrets That Banks Dont Want Published

A History of Money and TradeTo start with a history... Read More

Craving For Financial Freedom

Have you ever felt trapped in a Rat Race and... Read More

Bouncing Back from a CCJ

Should you be unfortunate enough to face a CCJ ?... Read More

Different Ways Of Dealing With Debt

Bills, creditors, debt collectors. Are you yearning for the days... Read More

What is Bankruptcy?

Personal bankruptcy is a legal way to give people with... Read More

How to Get Money When You Are Broke

(Money You Don't Have to Pay Back) 1. One way... Read More

Bankruptcy, Is It A Way Out

Negotiations with creditors have failed. Repossession is imminent and foreclosure... Read More

What Are The Benefits and Consequences Of Getting Rid Of Debt The Easy Way

We have all experienced getting so far in debt we... Read More

Your Ticket Out of Debt Relief

If you are in debt over your head and wondering... Read More

Bankruptcy - Your Fresh Start

Most American consumers are living too close to the edge.... Read More