Debt Help: Your Debt Relief Options
The Think Debt Relief program has a proven track record of helping our customers with their debt problems, and we believe debt resolution is a good solution for many people. But we also know it may not be the right answer for everyone.
We want to make sure any debt relief program you choose is the one that’s right for you. That’s why we provide information on alternative debt solutions, so you can make an informed decision about what kind of debt relief program best fits your goals and your financial situation:
Debt Resolution
The aim of a debt resolution program — also known as “debt settlement” or “debt negotiation”— is to resolve your outstanding debts for less than what you owe. Some debt negotiation programs simply use sales agents trained as negotiators to work on your behalf, but in the Think Debt Relief program, you get the benefit of legal expertise and a proven, national network of debt attorneys.
Our experienced debt attorneys will work with your creditors to negotiate resolution agreements on the debts you enroll in the program. In a successful resolution agreement, a creditor agrees to accept payment for less than what you owe in order to resolve your outstanding account.
The attorneys working with Think Debt Relief offer a 35% minimum performance standard: If they’re not able to negotiate away at least 35% of your debt amount, they’ll refund your fees on that account and still work to successfully resolve that debt to your satisfaction.
Consumer Credit Counseling
Credit counseling, like debt resolution, involves negotiations with your creditors, but credit counselors, rather than negotiating a lump resolution amount, work to negotiate lower monthly payments, lower interest rates, and reductions or waivers of fees and penalties.
A credit counseling program will set you up with a debt management plan that consolidates the monthly payments on your enrolled debts into one single monthly payment.
Credit Counseling vs. Debt Resolution
Getting Out of Debt
Whereas in a debt resolution, your creditor will be paid off in one lump sum from the funds in your Debt Reduction Account, in a credit counseling program, your creditors will be paid monthly, with your account paid off over time.
Debt resolution doesn’t work to lower your interest rates; instead, debt resolution negotiators work to negotiate down the total amount of debt your creditor is demanding as payment. This type of debt write-off is not typically a part of a credit counseling program: In a credit counseling debt management plan, you’ll generally have to pay back your creditors 100 percent of what you owe.
Monthly Program Payments
You’ll send in a single monthly payment to your credit counseling agency, according to the terms of your debt management plan, and the credit counseling agency will in turn distribute your payment among your creditors.
Why Creditors Prefer Credit Counseling
Because creditors will usually receive more money from you when you enroll in a credit counseling program than when you sign up for a debt resolution program, your creditors may generally be willing to work with a credit counselor to lower your interest rate, your minimum monthly payment, and any accumulated fees, in order to encourage you to continue making your monthly payments.
However, credit counseling will generally have less of an adverse effect on your credit than either debt resolution or bankruptcy.
Debt Consolidation
Debt consolidation involves taking out a consolidation loan, which you use to pay off all your eligible debts. A debt consolidation loan allows you to bundle all your eligible debts into a single loan, so you’re replacing multiple monthly bills with just one monthly bill and a single monthly payment to one creditor.
Your new monthly payment on your debt consolidation loan may be lower than what you owed before, each month, on all your bills added together.
Debt Consolidation vs. Debt Resolution
Getting Out of Debt
Unlike debt resolution, which works to get you out of debt by settling your balances and closing your accounts with your creditors, debt consolidation simply moves your debt from creditor to another. There’s no negotiating down of your balances when you consolidate — you still owe the same amount you did before (sometimes even more, once you add in any debt consolidation program fees), just to a different creditor.
Monthly Program Payments
And although your monthly bills may go down with a debt consolidation loan, these smaller payments are often the result of your debt being spread out over a longer period of time. You may get several more years to pay off your debt consolidation loan, but that means you could actually end up spending thousands of dollars more in interest to pay your debt off.
Debt Consolidation Risks
A debt consolidation also typically turns your unsecured debt into secured debt, which means some of your property is now at risk. Debt consolidation loans are usually secured loans, which means you’re required to use your home, car, or other personal assets as collateral. If you miss payments on your debt consolidation loan, you could lose your home, car, or other collateral to your lender.
You don’t run this same risk when your debts are unsecured. Credit cards, department store cards, and medical bills are examples of unsecured debt. When you enroll your unsecured debts in a debt resolution program, your enrolled debts remain unsecured; you’re not putting up any of your property as collateral that your creditor could then seize.
Bankruptcy
One of the most important things to know about bankruptcy is that declaring bankruptcy doesn’t automatically get rid of your debt.
In fact, stricter bankruptcy laws passed in 2005 made it much harder for consumers to qualify for the type of bankruptcy that wipes out your debts (a Chapter 7 “liquidation” bankruptcy).
When you declare bankruptcy, your debts, income, assets, and financial situation will be thoroughly analyzed during bankruptcy court proceedings. A bankruptcy judge may decide, based on your financial resources, that you’re eligible only for a Chapter 13 repayment bankruptcy, which requires you to repay some or all of your debt on a bankruptcy payment plan.
If you do qualify for a Chapter 7 bankruptcy, your debts will be discharged, but you’ll be required to sell off (“liquidate”) all your property that isn’t protected by law.
Bankruptcy is a very serious decision, with consequences that can last for over a decade. Most financial experts recommend that you consider bankruptcy only as a last resort. If you’re thinking of declaring bankruptcy, you should speak with an attorney before making any decision.
Bankruptcy vs. Debt Resolution
Getting Out of Debt
While our debt resolution program can only help you with your unsecured debt, you may be able to include both unsecured and secured debt in a bankruptcy.
Monthly Program Payments
When you declare bankruptcy, your debts, income, assets, and financial situation will be thoroughly analyzed during bankruptcy court proceedings. A bankruptcy judge may decide, based on your financial resources, that you’re eligible only for a Chapter 13 repayment bankruptcy, which requires you to repay some or all of your debt on a bankruptcy payment plan.
Bankruptcy Risks
But keep in mind that a bankruptcy can stay on your credit report for seven to 10 years and on your official court records for more than 20 years — sometimes for the rest of your life — hurting your chances to qualify for loans and credit cards, buy a house or car, or rent an apartment. Besides its long-lasting effect on your credit, a bankruptcy in your history can be embarrassing and damaging to your reputation, and in some cases, could even keep you from getting hired when you apply for a job.
Although your credit score will drop while you’re in a debt resolution program, once you’ve successfully completed the program, your unsecured debts will be paid off, and you’ll be able to start taking steps to get your life back and rebuild your financial foundation — without a bankruptcy to hang over you and your credit report for as long as 10 years.†
As our professional debt negotiators reach resolution agreements with your creditors and you pay off your new, lower balances, you’ll be getting out of debt without having to lose your property or set up a lengthy bankruptcy repayment plan.
