How Should I Pay Off My Credit Card Debt?

Generally speaking the best way to pay off your debt is to pay it off in full and on your own without the help of credit counseling or debt settlement.  However, if you think it is going to take more than three years to pay off your debt on your own then it may be worth considering enrollment in a debt settlement program. 

If you are curious about how long it will take you to pay off your unsecured debt (credit cards, personal loans, lines of credit etc.) use an online calculator like the one found at www.bankrate.com.  There are several calculators on the website but I would recommend using “What Will It Take To Pay Off My Credit Card“.  Play around with different figures but you should get a sense for how long it will take you to pay off your different accounts.

Two important considerations are the interest rate charged and the monthly amount you are required to pay by the creditor.  Keep in mind that the creditor can typically change these amounts any time they wish.  If your interest rate is 10% now it may not be that way for the entire time you are paying off the debt.  Interest rates have been increasing for many consumers as creditors have lowered limits and increased monthly payment requirements.

Staying current with your monthly payments to your creditors does not guarantee that you will have a good credit score.  Consider all of your options carefully but in the end I would recommend choosing the option that will result in you getting out debt sooner rather than later.

Technorati Tags: how should i pay off my credit card debt, payoff options, debt settlement, credit counseling, bankrate.com, what will it take to pay off my credit card

How To Choose A Debt Settlement Company

With the downturn in the economy many fly-by-night debt settlement/debt negotiation companies have cropped up.  If you are shopping around for a debt settlement company be careful.  It seems with each passing week I hear another horror story about a company that took a client’s money and ran.  Not to mention an increasing number of companies are being pursued by the Federal Trade Commission in connection with complaints filed by consumers.

I previously wrote about the Ten Questions to Ask When Evaluating a Debt Settlement Company.  Now, more than ever, it is critical that YOU ask these questions when seeking help from a qualified debt settlement company.  Do not take the word of the sales rep/debt consultant when calling a debt settlement company.  It will only take you a few minutes to do some research online to find out how long a company has been in business and what their Better Business Bureau rating is.

Remember that committing to a debt settlement program is a long-term relationship.  Avoid high pressure sales tactics and take your time in making a decision.

Technorati Tags: how to choose a debt settlement company, better business bureau, debt negotiation, debt relief, debt management

Loan Modification – Do It Yourself

Scams – Last week it was announced that Federal and State agencies are targeting foreclosure rescue scams/loan modification fraud.  The complete press release can be read on the Federal Housing Administration website here:

http://portal.hud.gov/portal/page?_pageid=73,7931933&_dad=portal&_schema=PORTAL. 

The California Department of Real Estate also recently launched a website alerting consumers to loan modification service scams:

http://www.dre.ca.gov/mlb_adv_fees.html. 

Contact your State’s Department of Real Estate to see who is licensed to do business in your State.

Just about everyone these days is receiving SPAM e-mails or regular mail advertising loan modification or foreclosure assistance.  Many of these companies are not licensed or registered to conduct this type of business.  Be extremely wary of ANY service that requires an upfront fee.  If you do enlist the help of a loan modification specialist make sure they have a 100% money back guarantee.  It is also important to realize that if they successfully reduce your mortgage payment, even if only by a few dollars, they are still entitled to receiving their fee in most cases.  This fee typically ranges from $2000 to $4000.

You Can Do It Yourself - Start here: http://www.hud.gov/offices/hsg/sfh/hcc/fc/.  The U.S. Department of Housing and Urban Development has approved counseling agencies that are equipped to provide you with advice for FREE.  Before you go and pay someone to modify your loan do yourself a favor and speak to an approved counselor about your situation.  In most cases they will assist you in making a decision and with providing the lender the requisite information so that your lender’s loss mitigation department can process your request.

Another fantastic resource is Hope Now (www.hopenow.com), an alliance between HUD counseling agents, mortgage companies, investors, and other mortgage market participants that provides free foreclosure prevention assistance.  Take some time to explore the website and resources available online.  If you are not comfortable accessing information online feel free to call them directly at (800) 995-HOPE.

If you have the time and desire you can most likely work directly with your lender to successfully modify your home loan(s).  This process is going to require a lot of patience and determination but it’s not overly complex.  In most cases the lender is simply going to require that you provide an outline of your budget (monthly income and expenses aka profit and loss statement), a hardship letter, and some form of income verification for the past six months (pay stubs if you are employed or bank statements if you are self-employed).  Once they receive this information it will typically take the bank’s loss mitigation department between 4 – 12 weeks to review your file.  This depends entirely on how backed up the lender is.  Keep track of everything you send and how.  You may quickly discover that it is difficult and frustrating dealing with your lender.  Don’t give up.  Make sure they get your faxes.  Make sure they answer the phone.  Find someone to speak with that communicates well and call them every week until your loan modification request is complete.  Every lender is different in how they handle loan modification requests so make sure you continually ask them if they need anything else.  Make sure they have all the information they need to make a decision for you.

Technorati Tags: do it yourself loan modification, loan modification hardship letter, loan modification scams, HUD, U.S. Department of Housing and Urban Development, DRE, Department of Real Estate, Hope Now, foreclosure counseling, foreclosure prevention, modify your loan, foreclosure rescue scams

Can I Avoid Bankruptcy?

Often times this question simply boils down to cash flow.   If one has enough net income every month to pay for their living expenses and there’s a little left over for one’s creditors then bankruptcy might be avoided.

If you are struggling to make your monthly payments to your creditors it’s time to take a hard look at your budget.  Take a few moments to prepare a simple budget analysis to determine if you have sufficient cash flow to make ends meet.  If you’re running negative then it may be time to arrange for a free consultation with a qualified bankruptcy attorney.  However, if you have a little income left over to work with then bankruptcy could be avoided.  For more information on budgeting see: “Can You Afford A Debt Settlement Program”.

Qualifying for bankruptcy can be tough.  There are several means tests that a qualified bankruptcy attorney will perform in order to determine if you should file either Chapter 7 or Chapter 13 bankruptcy.  If you actually qualify for bankruptcy you are in essence rescinding most of your control over your finances.  Additionally, the cost of filing usually starts at about $1,500 and goes up from there depending on the complexity of your circumstances.  See http://www.provanta.com/bankruptcy/.

Take a moment to determine if you really are Living Beyond Your Means.  If you make some time now to examine your financial circumstances you may be able to avoid impending financial ruin.  Don’t wait until it’s too late to to take a hard look at your finances.  It may be painful but once you do you will be that much closer to experiencing financial freedom.  You may have several options from CCCS (consumer credit counseling services), to debt settlement, to bankruptcy.  However, if you wait too long you may ultimately limit yourself to the last and most painful option of bankruptcy.

Provanta is not a law firm and none of our employees or contractors are attorneys.  However, if you are interested in determining if you qualify for our debt settlement program please feel free to contact us for a consultation.

Technorati Tags: bankruptcy alternatives, alternatives to bankruptcy, debt settlement, debt forgiveness, budgeting, budget, bankruptcy attorney

10 Questions to Ask When Evaluating a Debt Settlement Company

Evaluating a debt settlement company can be tough.  It seems that wherever you turn some debt relief company is trying to get your attention via a variety of channels from radio, TV, the Internet, e-mail, to even the bus bench.  Who can you trust? Who is reputable? And, more importantly, who is going to actually perform for you?  

As discussed in previous postings (see “Commitment“), entering a debt settlement program is a LONG-TERM commitment.  It takes a great deal of time and effort for the debt settlement company to negotiate settlements and it takes time and effort for you, the client, to save money for the settlements.

When evaluating doing business with a debt settlement company there are many important questions to ask.  However, the following items represent what I consider to be the “top 10″ questions to ask as you investigate various debt settlement companies:

1. How long have you been in the debt settlement business? In my opinion the answer needs to be at least 10 years.  Any less and the company does not have enough of a track record to provide feedback on average settlement rates etc. 
2. Are you going to be handling my settlements or do you outsource this to a third-party?  Generally speaking you do NOT want to be dealing with more than one company.  You are going to feel more at ease dealing with a single entity rather than several.
3. Are you a member of the Better Business Bureau (BBB)?  If not you can immediately discard the company regardless of what they say.  If they are a member visit www.bbb.org to search for the business listing.  Make sure that all outstanding complaints, if any, have been resolved.
4. Can you do business in my state of residence?
5. Can you reach settlements with my creditors?  Provide the company a list of your creditors with the respective balances.  Make sure they have a history of settling with your particular creditors.  Tell them your story.   Provide a little background as to how the debt accrued.
6. What is the total cost of the program including fees?  This figure should be somewhere around 60% of your current debt amount.
7. How much are your fees and how are they assessed?  The answer you should be looking for is somewhere between 15 – 20% and the fees should be fixed.  If there are “administrative”, “retainer”, “variable”, or other fees involved, or if the company cannot quote you a figure for fees then this might be a red flag.
8. What are your hours of business and who can I contact if I have a question regarding my account?  The rep you speak with on the phone with may not ultimately be the person you have to deal with if you have an issue.  Strong customer service is the cornerstone of a successful debt settlement company.
9. What is your web address (URL)?  The company website can provide a wealth of information as to the legitimacy of the business.  Make sure they list a physical address under the “contact us/about us” page.  Look around for fresh content.  Make sure the site is copyrighted for the current year.  Make sure there are no discrepancies between the messages on the website and what the representative on the phone tells you.
10. Ask a couple tough questions and guage the response.  For example, “can my creditors sue me”, “will they continue to call me”, and “will my credit score go down”?  The answer to all these questions is “yes” so make sure the representative does a good job explaining why.

Another Debt Free Client

A middle aged couple from the Northeast recently completed their debt settlement program with Provanta.  They enrolled 10 accounts in the program.  Nine of those account were settled for a total of 40% of the current balance (51% of the original balance).  Great settlements overall.

One account was not settled because the account could not be located.  When we contacted the credit card company, we were told that they had no record of the account.  We asked our client to obtain their free credit report so that we could review it.  It turns out the account could not be found on the credit report either.  This is rare but we come across these situations from time to time.  There are several possible explanations.  Perhaps the credit card company simply made internal errors and erased all record of the account.  Maybe the credit card company has simply let the account slip through the cracks and they don’t want to bother with it anymore.  It may even be possible that the account may resurface in the future.  In any case, the clients decided to simply close the account since no one was collecting on it any more.

Our client can move forward with their credit card debt-free life with confidence that if the account ever resurfaces in the future, they can come back to Provanta and we will help them resolve it.

Ref. 1537

Give Yourself an Early Christmas

Yes, it’s October 1st and yes, I did say “Christmas”.  I am ordinarily one of the first to complain about how Christmas decorations seem to promulgate retail establishments sooner-and-sooner with every passing year but this year is different.  Why?  The meltdown in the financial markets and the economy has given everyone in this country the opportunity to take a second look at their personal financial circumstances.  The observed changes to a certain extent effect everyone. 

What does Christmas, the financial sector, and the economy have to do with each other?  Well, as you may or may not know most retailers go “in the black” during the holiday shopping season.  In other words the sales/revenue generated during the holiday season typically predicates whether or not they turn a profit for their fiscal year.  What this means is that they are absolutely dependent on American consumers having disposable income to spend on gifts and the like during the holiday rush.  If Americans don’t spend as they ordinarily would then retailers may suffer, may actually end the year “in the red”, and may not be able to sustain growth during the next fiscal year.  Some may even go out of business.

To this end I am encouraging everyone to start preparing now.  Buy your Christmas gifts a little earlier this year.  Look for sales.  More importantly create a budget for October, November, and December.  Don’t wait until the last minute to load up your credit cards with gifts on December 24th.

The most significant and important gift one can give themselves or their family is a balanced budget.  I realize this is not a very exciting topic but if you work toward this end now then you may actually have a worry free holiday season.  If you currently carry a large amount of revolving unsecured debt on credit cards and personal loans now is absolutely the time to strategize as to how you are going to pay off the debt.  Don’t wait until the new year!  If you cannot balance your budget and cannot pay off your unsecured debt within three to four years on your own then it is time to reach out and look for some professional help.  Investigate your options.  Find a reputable company with a proven track record of success to help you plan on how to eliminate your debt.

Give yourself and your family the ultimate gift this year – financial freedom.

Technorati Tags: debt settlement, consumer credit counseling, budgeting, Christmas, holidays, shopping

Commitment

One size does not fit all.  Everyone suffers from unique symptoms that require an individualized remedy.  Regardless of the plan of action to eliminate debt, it takes a high level of commitment.

If you have ever worked with a fitness/athletic trainer you know this to be true.  Any trainer worth their salt will tell you that in order to see results, long-term commitment is needed.  Results simply don’t happen overnight.  The same applies to any plan chosen to eliminate one’s debt.  Too often those struggling with debt assume that there is a magic bullet that will somehow fix all of their problems.

Whether one decides on a debt settlement program, consumer credit counseling, a home equity line of credit (HELOC), bankruptcy, or simply to pay off the debt on their own, one must be fully ready to COMMIT.  Success, in any area of life, requires a high level of perseverance and commitment.  This is especially true as it pertains to one’s finances.

If you are struggling with debt take a few moments to think about how long it took you to accrue the debt.  It is important to realize that any plan to eliminate the debt, no matter how carefully thought out, is most likely going to take several years to execute.  Once you have made that decision to live cash only and live a life free of debt take a deep breath.  This is going to be an endurance run and not a sprint.  Focus in on the finish line with the unwavering eye of an Olympian and don’t quit until the last penny of your debt has been taken care of.

Many have traveled this path before and rest assured that you are not alone in your quest.  For words of encouragement and ideas please read other blog postings on this site or give us a call to discuss your options.

Technorati Tags: debt forgiveness, debt settlement, debt relief options, cccs, consumer credit counseling, home equity line of credit, heloc, debt consolidation, bankruptcy

What Are My Options

 

Technorati Tags: debt settlement, debt forgiveness, introduction to debt settlement, debt settlement video

Stubborn Creditors

Our debt settlement programs average 36 months from start to finish but we have some clients who are enrolled for a longer time.  Longer than average programs may happen for a variety of reasons.  It can occur when a client skips or reduces his regularly scheduled monthly deposits for the program (often during times of job loss, unexpected expenses, accidents, etc), when difficult litigation situations arise, or when changes occur in a credit card company’s policy.

In one particular client’s situation, he actually had 13 of his scheduled monthly deposits skipped or returned to Provanta as NSFs (non sufficient funds), which was likely the main cause of his program extending to 5 years.  In addition to his long program, Provanta was unable to settle his final account.  The reason for this has less do with the NSFs, however, and more to do with the creditor’s stubbornness.

When the client enrolled, he provided information to Provanta showing that he owed $4,600 to this creditor.   Whenever the creditor responded to our attempts to negotiate, they would make an extremely high settlement demand such as $5,900 or $6,700.  Since the creditor continued to be unreasonable, Provanta focused our efforts to settle accounts with the other creditors who were willing to work out a resolution to the account.

The other accounts settled for a gross total of 46 cents on the dollar while this creditor continued to decline our settlement offers.  We eventually referred the client to an attorney in order to investigate whether his account may have reached the statute of limitations, which would mean the creditor could be unable to pursue legal action as an option to collect the debt.

Despite this, the client asked us to continue negotiations.  He still wanted to resolve the account and pay the creditor as much as he could.  After explaining that the client may have reached the statute of limitations, the creditor still refused to settle the account for a reasonable amount, “reasonable” being an amount that contemplates the statute of limitations possibility.  Keep in mind that this creditor had not received payment on the account for 5 years and would unlikely be able to collect from this client in the future.  In the end, our client decided to officially withdraw and we ensured that the bank holding the funds he reserved to settle the last account returned those funds to him.  This money could have been used to pay the creditor, but since they insisted on taking $0 over a period of five years of offers, our client will likely use these funds elsewhere.

(Ref. 1524)

Technorati Tags: debt settlement, statute of limitations on debts, debt negotiation

Debt & Medical Issues

For many years it has been readily apparent to those working in the debt relief industry that many of our clients have a medical hardship.  This was recently confirmed by an article published by CNN:

http://www.cnn.com/2008/LIVING/personal/06/09/stressing.over.debt.ap/index.html

While we know that a medical hardship can contribute to rising amounts of debt what we often don’t realize is that the stress of dealing with debt can actually lead to an increase in medical issues. 

The CNN article summarizes findings from a recent poll conducted by the Associated Press-AOL Health.  This survey of just over 1,000 adults with debt found that:

• 27 percent had ulcers or digestive tract problems, compared with 8 percent of those with low levels of debt stress.
• 44 percent had migraines or other headaches, compared with 15 percent
• 29 percent suffered severe anxiety, compared with 4 percent
• 23 percent had severe depression, compared with 4 percent
• 6 percent reported heart attacks, double the rate for those with low debt stress
• More than half, 51 percent, had muscle tension, including pain the lower back.  That compared with 31 percent of those with low levels of debt stress.

Major medical issues often prove to be the catalyst in deteriorating personal financial circumstances.  However, based on the findings in this article it also appears that resulting high debt levels can exacerbate pre-existing medical issues or create new problems for those struggling with debt.

Technorati Tags: debt settlement, medical hardship, financial hardship

Help, I Have Debt! Which Path Should I Take?

I am often asked by potential clients if they think a debt settlement program is a good fit based on their current financial situation. While there is a plethora of possible answers to this question, I typically resort to the shorter, more concise answer: “it depends on cash flow.” I know that most will find this answer unsatisfactory, but our experience suggests that one’s cash flow ought to fundamentally predicate the type of program decided upon. Of course, I should mention that individual circumstances vary and there may be important ancillary factors to take into consideration.

If one actually has some discretionary income at the end of the month, after all expenses (including credit card minimums) are paid, then there’s quite a bit more flexibility in choosing a path. With any amount of discretionary income, one may simply accelerate their payment schedules to each of their creditors. I typically recommend paying off a couple small accounts first — to build momentum — followed by focusing efforts to pay off higher interest accounts first. A handy payment calculator can be found at www.bankrate.com/brm/calc/creditcardpay.asp.

If you find that even with an accelerated payment schedule, it’s going to take you far too much time than what you would like to eliminate your debt, then another path should be considered. A good rule of thumb: if you think it will take more than three years to pay off your credit card debt on your own then you should consider a debt relief plan/program provided by a reputable company with a track record of success. It is important to research all of your options; from consolidating your debt via a home equity line of credit, to a consumer credit counseling service, to a debt settlement program…even bankruptcy, as your last and final resort. The focus should be on how quickly you can eliminate the debt. Determine the feasibility of a program, according to your unique circumstances and values, and not upon the lofty and often self-serving predictions of a debt or budget counselor sales representative tells you. While maintaining a good credit history is important, for example, you are doing yourself a disservice by carrying large balances on unsecured accounts over an extended period of time (in  terms of credit score, as well as the high interest you pay). In fact, a high debt to credit ratio may have a significant negative impact on your credit score. See www.myfico.com/CreditEducation for more information.

Technorati Tags: bankruptcy, debt help, financial budget, getting out of debt, debt counseling, credit counseling, debt consolidation