Debt Relief Programs

Debt relief programs can be used to help reduce a consumer’s debt load. These programs are often a last-ditch effort to avoid bankruptcy, and might allow you to remain in your home or retain ownership of other valuable assets. However, debt relief programs can also cause more harm than good and it’s important you have a comprehensive understanding of any program you consider and that you be absolutely sure the program you choose will pay off in the long run.

What do you need to know about debt relief programs?

Companies that offer debt relief promise their programs will “help you get control of your finances” and “provide a way for you to meet your debt obligations.” They offer to relieve the stress associated with out-of-control debt and give you comfort about the situation in which you find yourself. Most of them paint bankruptcy as the worst case scenario and promote their ability to help you take responsibility for your debts.

Some programs encourage debt consolidation, which allows you to roll multiple debts into one single loan. This requires taking out a new single loan and using that money to pay off your existing loans. Others work with you to restructure existing debt to make it affordable. And still others accept a single payment from you and pay the debts you owe on your behalf. Whatever they negotiate is between the relief program and your creditors.

They tout this single payment arrangement as simple and organized, and able to reduce the stress you feel juggling various debts each month. You’ll be promised peace of mind, improved ability to save money, convenience, and relief from the threat of foreclosure, repossession, and bankruptcy.

Unfortunately, many of the promises offered by debt relief programs are empty. Consumers have sought relief from these programs only to find their financial situation far worse than it was before they entered into an agreement with the program.

Debt Consolidation vs. Debt Settlement

Debt consolidation takes multiple credit card balances and blends them into a single loan. This not only organizes your monthly financial output, it can reduce the amount of interest you pay overall. However, it requires you be able to transfer several balances into one and that you get an interest rate that will truly decrease your overall payments.  Usually you end up paying more over time.

Debt settlement, on the other hand, is a way to pay off your debts. Instead of paying the total amount you currently owe, you negotiate a lump sum settlement payment with the lender. You might continue to make monthly payments until you have enough to pay the lump sum or you might negotiate an immediate pay off. The specific details of the settlement are arranged by the lender and the debt relief program.  Usually you must be in default before your creditor will accept any discount via lump sum.

Settling a debt is a great option in many cases, but there is a downside. Settling a debt will negatively impact your credit report, but for a shorter period of time than many other options. Usually a charge-off of a debt affects your credit for about two to three years.  At Weston Legal we advise not to settle debt unless you have already defaulted.

You’ll also need to take into account any tax implications that might come with debt settlement. There’s no sense in arranging a lump sum payment if you are going to owe more than you can afford to the IRS.

Working with a Debt Relief Law Firm

What most debt relief programs don’t assist with are lawsuits.  Most likely you will be sued for a debt if you defaulted.  Credit card companies file thousands of lawsuits every month.  At Weston Legal we have defended thousands of debt collection lawsuits. 

If you are considering a debt relief program or you know you need to do something to ease your financial burden, but you aren’t sure what that is, we can help. We’ve worked with consumers from all walks of life facing various financial struggles that seemed impossible to overcome. To learn more or to schedule a consultation to discuss your situation, contact 1.800.220.4318

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