In today's world, it is often easy to get in over your head and find yourself spending more than you make. It seems that everything is going up but wages, and it is all too easy to fall behind. As the result, debt incurred and accumulated over the time; initially, you are able to pay your credit card balances in full on each month and when more and more accumulated, you may go for minimum payment, then when come to the, your income may not afford to even support the minimum payments.
Like many who trap into unbearable debts, you may want to get rid of your debts by filling a bankruptcy. But bankruptcy can carry a legacy you will have to live with for years. A bankruptcy filing will stay on your record for a minimum of seven years, and you may find it difficult or impossible to obtain necessary credit in the interim.
Luckily, there are still others possible alternatives before you make up your ultimate decision on bankruptcy. You can enroll into a debt reduction program or enroll in a credit counseling program. These are the most popular debt solutions for many debtors, but you may confuse what are the differences between these two popular debt solutions, making you hard to decide your choice to enroll to credit counseling program or debt reduction program.
While there are some similarities between these two types of programs, there are some important differences to consider as well. Let us consider a few of the most important differences between debt reduction and credit counseling.
1. Close Your Credit Accounts
In credit counseling program, you will require to close all your credit accounts, exception for some exceptions like accounts for business needs, accounts with zero or very small balances. Whereas, debt reduction programs do not require all credit accounts to be closed. Sometimes, it's good to keep a few of credit cards for emergency purposes.
2. Completion Period
Credit counseling services typically take longer to complete than debt reduction services. The average length of time to liquidate debt through a credit counseling service is 5 years whereas in debt reduction programs can be completed in less than a year.
3. Cost Saving
One of the advantages of debt reduction program over credit counseling program is in term of cost saving. In debt reduction program, you may only need to pay a settlement amount of 20% - 60% of amount owned. Whereas, in credit counseling program you normally need to repay a full amount owned with some discount and interest waived.
4. Credit Score
Your credit score is more affected in debt reduction program as compare to credit counseling program. In debt reduction program, the creditors may report the remaining amount between the amount you owned with the settlement amount as the "deficiency balance" to the credit bureaus as a negative item and it will be noted at your credit report and impact your credit scores. Generally, credit-reporting agencies will re-age the accounts of consumers enrolled in credit counseling services after three payments have been made.
5. Bargaining Power
In credit counseling program, your credit counselor will come out a debt repayment proposal to your creditors and it relies on your creditors to accept or reject the proposal. Whereas, with a debt reduction program, all creditors are will be notified about your hardship situation to repay your debt and you are desired to resolve it through a negotiated debt reduction agreement. Hence, creditors have no much choice in debt reduction program except try to negotiate to get back as much payment as possible from their debtors.
In Summary
Both credit counseling program and debt reduction program are a better debt solution option than bankruptcy. The two programs serve the same purpose to help you to get out from debts, but there are some differences between these two debt solutions and each program has its own pros and cons.
Cornie Herring is the author from http://www.studykiosk.com/CreditBasics. "StudyKiosk-Credit Basics" is an informational website on credit basics, debt solutions and bankruptcy.
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On several occasions, I have been contacted by companies that say they can get creditors to accept a much smaller amount than what I actually owe to them and that it would be a settlement. I find that hard to believe. I am sure that those companies will want the full amount owed to them. I'm thinking that if I do not pay them for some length of time while one of those companies is trying to get the creditors to settle for less money, that they will keep tacking on late fees which will increase the amount I owe to them and I would be worse off than I am now. My bills have grown to more than I can handle because of unavoidable circumstances. I didn't want to file bankruptcy and ruin my credit rating. I currently have a great credit rating, but I believe it is going to go down hill very soon. Is there an answer to my problem?
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how do you apply for goverment debt relief grants without going thru company selling the info? If it' free why pay someone for the info?
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Suppose you have debt can the person you owe money too attack a joint checking account if that is all the money that goes in the account is from socail security?
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