Finding yourself in more debt than you can bear? You wouldn’t be unique. Overall American credit card debt reached $927 billion in 2017, a five percent increase, according to NerdWallet. As you can imagine, this means that the average American household with credit card debt carries a lot of it; $15,482 to be exact.
Combined with the accruing monthly credit card interest and secured loans like a mortgage or auto, a consumer can quickly get in over their head.
If this scenario sounds familiar, there’s no shame in seeking a debt relief solution. After all, the worst way to handle debt is to do nothing. Instead, be proactive; start your search for debt relief solutions properly with this baseline approach.
Don’t Expect a Fast Resolution
If you’re expecting to get rid of your debt in a relatively quick manner, be prepared to lose some stuff. Chapter 7 bankruptcy is the fastest option by far, taking 4–6 months, but the court may seize some of your assets to help pay back your creditors. You can protect your assets with a lengthier approach; debt settlement takes between 2–4 years and chapter 13 bankruptcy 3-5 years. Consolidation and credit counseling timelines will vary based on your debt level but will still take time to play out.
For-Profit Doesn’t Mean Scam
A company isn’t a scam just because they are for profit. In fact, most debt settlement companies, as well as lawyers, will be working for a profit should you seek debt relief assistance through them. Whether you declare chapter 7 or 13 bankruptcy, you’ll have pay court costs, attorney fees and financial management courses. Opting for debt settlement (and having success) will require you to pay a percentage fee based on the original amount of the resolved debt.
Non-Profit Doesn’t Automatically Mean Trust
You’ll be hard-pressed to find a company that doesn’t charge money to wipe away your debt or a legal route free of financial obligations. If your situation doesn’t require any debt forgiveness, many credit unions, religious organizations, and legitimate non-profit agencies provide free or low-cost counseling options.
Be forewarned: just because a credit counseling company has nonprofit status, doesn’t mean their services are free, affordable, or even legitimate, per the FTC. Some credit counseling organizations may try to conceal the high fees they charge or ask for “voluntary” contributions. Make sure any credit counseling agency you work with is accredited by the National Foundation for Credit Counseling (NFCC) and Financial Counseling Association of America (FCAA).
Always Trust Your Gut
You can tell a lot from talking to a company representative on the phone and asking thoughtful questions. Are they patient and thorough with their answers? Are they asking insightful questions about your situation? Or are they steering you toward a product or solution of theirs with little concern for educating you?
If a company feels like they’re out for your money, they probably are. Legitimate companies put education first, only giving advice after carefully studying your financial situation. Validate your feelings by checking review sites like Consumer Affairs and investigate each company’s website. The company you work with should have a resourceful website filled with information on the process. An example would be the Freedom Debt Relief reviews and FAQ page, which provides clear, detailed answers to over a dozen commonly asked debt relief questions.
Know Your Caveats
All options carry caveats. Being aware of them ahead of time helps to avoid “uh-oh” moments. For example, while declaring chapter 7 is by far the fastest debt relief option, it stays on credit reports for up to a decade, three years longer than debt settlement or chapter 13 bankruptcy. Chapter 7 also results in the liquidation of your non-exempt assets, meaning, any property that you don’t need to maintain a home and job. Last thing: with debt settlement, any debt you are forgiven will be taxed by the IRS as income, so be prepared for a bigger tax bill if you have success with debt settlement.
Debt Relief isn’t for the faint of heart but can provide that spark needed to leave debt behind for good. Keep the above tips in mind when exploring different debt relief options so you can make the best choice for your situation.