Approach Debt Relief Programs Cautiously

Consumer debt is at an all-time high and over 1.5 million consumers filed for bankruptcy in 2004. Debt have you down? You’re not alone! Whether the result of illness, job loss, or simply overspending, a high debt load can seem overwhelming. Bankruptcy is often considered the step of last resort for consumers – the bankruptcy lasts 10 years on your credit report and can prevent you from purchasing a house, buying a new car, or getting the job you want.

You have probably heard the great deals to erase your debt:

“Consolidate your bills into one low monthly payment without borrowing!”

“Keep your property and erase your debt!”

“STOP harassing collection calls forever without a problem!”

Many of these advertisements are really for agencies helping you to file for bankruptcy (for a fee!). Be cautious of any organization offering to erase your debt with no repercussions to your credit – it’s just not possible!

If you are having trouble making payments on your debt, take these steps:

• Talk with your creditors. Creditors do not want you to give up and file bankruptcy – they may never see the money you owe. Try asking for a modified payment plan.
• Contact a credit counseling service. There are many legitimate credit counseling services available to help negotiate with your creditors and reduce your interest rate and propose a new payment plan. Typically these organizations require you to pay them a monthly amount which they distribute to your creditors. Sometimes there is a fee – shop around before deciding which credit counseling service to use.
• Equity in your home. Adding debt to your problems is not always the best solution, especially when it could mean losing your home, but taking out a second mortgage or home equity line of credit can help you consolidate your debt into one lower monthly payment. Be sure to investigate carefully – and not get into more debt once you have paid off the original debt!

If all else fails, bankruptcy may be an option for you. Be sure you research very carefully before declaring bankruptcy.