How to Pay Off $20,000 in Credit Card Debt Finding…
Kansas City Personal Debt Relief and Personal Debt Settlement[yoast-breadcrumb]
Kansas City Personal Debt Relief and Personal Debt Settlement
Dealing with overwhelming debt can feel hopeless. You make payments month after month, but the balances hardly go down. New unexpected expenses pop up, making it impossible to get ahead. If this sounds familiar, you may be wondering if debt relief could help – and what options you have.This article will explain the most common types of personal debt relief available in the Kansas City area. We’ll go over the pros and cons of each, who they are best suited for, and what to watch out for. Our goal is to provide useful information so you can make an informed decision if you decide to pursue debt relief.
When to Consider Debt Relief
The first question is whether debt relief makes sense for your situation. Here are some signs it may be time to explore your options:
- You are struggling to make even minimum payments on credit cards and other unsecured debt.
- Your debt payments take up over 50% of your monthly income.
- You’ve made drastic spending cuts but still can’t get ahead.
- You’ve had unexpected expenses that make catching up seem impossible.
- You’ve been using credit cards to pay for living expenses.
- You’ve borrowed from one card to pay another.
If you can relate to some of these, debt relief may help provide a fresh start. The key is being realistic about your ability to repay. If you could potentially pay off your unsecured debts within 5 years through strict budgeting and cutting expenses, you may not need debt relief. But if it would take much longer even with extreme frugality, it’s worth looking at alternatives.
Watch Out for Debt Relief Scams
Unfortunately, the debt relief industry has its share of scammers ready to take advantage of desperate consumers. Here are some red flags to watch out for:
- Pressure to sign up immediately for “limited time offers.” Legitimate providers give you time to review agreements.
- Promises to make debt “magically go away” or fix credit scores fast. Debt relief takes time and usually damages credit initially.
- Requests for large upfront fees before providing any services. Fees should only be charged as services are rendered.
- Telling you to stop communicating with creditors. You should still talk to creditors if possible.
- Guarantees they can make debt go away or that creditors will accept settlements. No guarantees can be made.
- Lack of required state licenses. Check license status with your Secretary of State office.
- Refusal to provide a contract detailing services, fees, and terms before signing up.
Avoid any provider making outlandish claims. Get promises in writing and research the company thoroughly first. Now let’s look at the most common types of personal debt relief.
For those with truly overwhelming debts compared to income, bankruptcy may be the most effective option. It eliminates most unsecured debts entirely through the court system. In return, you surrender any non-exempt assets. Bankruptcy stays on your credit report for 7-10 years.The two most common bankruptcy filings for consumers are Chapter 7 and Chapter 13. Chapter 7 liquidates your assets to pay creditors, while Chapter 13 sets up a 3-5 year repayment plan. Chapter 7 provides faster debt relief, but you must pass a “means test” to qualify. Chapter 13 allows you to keep assets like a house or car but takes longer.Bankruptcy has serious long-term impacts, like damaging credit scores and public records. We recommend consulting with a bankruptcy attorney before pursuing this option. They can advise if you qualify and what type of bankruptcy suits your situation.
Debt Management Plans
Debt management plans allow you to repay unsecured debts in full over time, but with reduced interest rates and waived fees. You make one payment each month to a nonprofit credit counseling agency, which distributes funds to your creditors.The benefits are avoiding bankruptcy, negotiating concessions from creditors, and consolidated payments. The downsides are repaying debts takes 3-5 years, you must qualify based on income, and missing payments can get you removed from the program.Only enroll with an accredited, reputable agency like those approved by the NFCC or FCAA. Understand all fees and be realistic about your ability to complete the plan.
With debt settlement, a company negotiates directly with your creditors to settle accounts for less than the full amount owed. This is an option if you can’t qualify for other relief programs but want to avoid bankruptcy.Here’s a typical process:
- You stop paying creditors and instead save up in a dedicated account.
- After you default, the debt settlement company approaches creditors to negotiate a reduced lump sum settlement.
- If they accept, you pay the settlement amount and the account is closed.
Settling debts has major downsides, including severe damage to credit, getting sued by creditors, and potential tax liability. We strongly recommend speaking to a lawyer before pursuing debt settlement.There are many unethical debt settlement companies, so do your homework. Get settlements in writing beforehand, know what fees you’ll pay, and make sure accounts are marked “settled” once paid.
Do-It-Yourself Debt Relief
You don’t necessarily need a formal debt relief program to negotiate with creditors. Here are some DIY debt relief strategies:
- Hardship programs: Ask creditors about hardship or financial assistance programs. These can lower interest rates or payments.
- Goodwill adjustments: Negotiate to have late fees, overlimit fees or interest waived as a “goodwill adjustment.”
- Pay for delete: Offer a lump sum payment to delete negative marks on your credit reports. Get any deal in writing first.
- Debt snowball: Focus extra payments on highest interest debt first while making minimums on others.
- Balance transfers: Transfer balances to a 0% intro APR card to save on interest.
- Debt consolidation loans: Combine debts into one payment with a lower interest rate.
The benefit of DIY debt relief is avoiding settlement fees. But it requires diligence, organization and comfort negotiating. Weigh the options to decide if it’s right for you or if you need a more structured program.<h2>Key Takeaways</h2> Debt relief can provide a lifeline if you have overwhelming, unmanageable debt compared to your income. But each option has pros, cons and eligibility requirements. Consider the impacts on credit, finances and emotions before pursuing relief.Common types of personal debt relief include:
- Bankruptcy – Eliminates most debts but severely damages credit.
- Debt management plans – Repay in full with lower interest.
- Debt settlement – Negotiate lump sum payoffs for less than owed.
- Do it yourself – Call creditors and negotiate your own deals.
Avoid debt relief scams. Vet any company thoroughly, get agreements in writing, and understand the consequences before signing up. With the right program, debt relief can offer a chance to regain financial control.