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
What Everybody Needs To Know...Learn The Truth About Debt Elimination... Read More
If your financial worries are preventing you from sleeping at... Read More
Debt settlement involves negotiating with a creditor or creditors to... Read More
With £1.3 trillion pounds worth of debt in the UK,... Read More
Filing bankruptcy is not fun! It is a last resort... Read More
Once you file bankruptcy a court appointed bankruptcy trustee will... Read More
There is current concern from the Bank of England that... Read More
Debt is not much fun and when faced with it,... Read More
Debt settlement is the process of negotiating with your creditors... Read More
Congress recently passed the Bankruptcy Abuse Prevention and Consumer Protection... Read More
Do You Need to Join a CCCS - Consumer Credit... Read More
Today's consumers benefit drastically from the usefulness of credit. Credit... Read More
Debt consolidation versus debt negotiation are two options that are... Read More
In this era where we are bombarded daily with commercials... Read More
1) Use your AssetsIf you have assets with some significant... Read More
It is possible for creditors and third-party collection agencies to... Read More
Of all the problems possible in a marriage, finances cause... Read More
A Debt Checklist allows you to look at items and... Read More
It all starts by defaulting on an obligation: Money owed... Read More
Bankruptcy is one of the most difficult things a person... Read More
The recently passed Bankruptcy Abuse prevention and Consumer Protection Act... Read More
Strictly speaking, his advice was preceded by another Heinlein maxim... Read More
When you hear the word "debt", whats the first thought... Read More
Still living from pay to pay? Or envying those great... Read More
Bankruptcy laws give debtors a way to resolve debt by... Read More
Ask a friend what resolutions they made for 2004 and... Read More
In April 2005, Congress made sweeping changes in U.S. bankruptcy... Read More
If you are in debt over your head and wondering... Read More
Can a debt consolidation loan eliminate your credit card debt?... Read More
As a single mother, lets admit it, times get tough.... Read More
Honorably and ethically rid yourself of burdensome debts using the... Read More
If you've ever earned enough money to put some aside,... Read More
Debt relief is a topic on a lot of consumers'... Read More
In April 2005, Congress made sweeping changes in U.S. bankruptcy... Read More
The New Year often brings with it a desire to... Read More
If you are in debt, well over your head in... Read More
Do you want to reduce your debt? Having trouble paying... Read More
Signing up for a debt management program is easy; it's... Read More
Massive debt is something many Americans face. Debt reduction is... Read More
Many people have been taught that you cannot get ahead... Read More
As vice president of the American Credit Foundation, a nonprofit... Read More
It seems as though whenever we go out for the... Read More
Credit counseling is a viable option for those who are... Read More
Bankruptcy is a legal way to offer folks with high... Read More
1. Eliminate the legal obligation to pay many of your... Read More
Living with debt is not something someone hopes for, but... Read More
Sometimes debt can seem overwhelming. In those instances, or even... Read More
Debt is becoming number one problem in the United States... Read More
Are you still clearing a mountain of debt amassed last... Read More
If you want financial freedom, the first thing that you... Read More
I'm not sure where it originated, but I've heard it... Read More
Today's consumers benefit drastically from the usefulness of credit. Credit... Read More
The overwhelming task of eliminating your debts can often seem... Read More
The main reason for getting out of debt today, is... Read More
Vehicle repossession may appear justified in circumstances where a person... Read More
A headline for a retirement annuities flyer declares "Future Secured!"... Read More
While driving around your community, you may have seen signs... Read More
It all starts by defaulting on an obligation: Money owed... Read More
There are two main roads to improving your personal finances:... Read More
Can you stop debt collectors ? . . .You better... Read More
Having something tangible to strive towards can work wonders for... Read More
Although many consumers would argue differently saving money doesn't have... Read More
Good credit is everyone's dream. A wise use of credit... Read More
Amy Wright, 34, was extatic when her realtor showed her... Read More
The business of banking has changed dramatically over the last... Read More
No, that's not a misprint. Even though falling interest rates... Read More
Debt Relief |