Cole asked: So, this is the situation – you’ve past-due notices suffocating the mailbox. You don’t want to answer the phone because it is just going to be another bill collector. You are borrowing off one card just to meet the minimum payments of another. Something has to be done.
The next step for too many Americans seems to be consulting bankruptcy attorney only to figure out that, even before paying the administrative fees charged by the courts, lawyer costs can be well over a thousand dollars! Sure, lawyers aren’t required to get through the bankruptcy process, but, unless the consumer has had a good deal of financial or legal training, the paperwork can be daunting even for professionals. Also, even for those people who can afford the lawyers and the court costs and do not care about the eventual repercussions as to credit reports (a smaller group of people, to be sure), most of us aren’t that keen on our financial embarrassments becoming public knowledge. Once a borrower files for bankruptcy, absolutely anyone can then find that out simply by placing a call to the county courthouse. More to the point, telemarketing agencies and direct mail firms can receive the telephone numbers and mailing addresses of the newly bankrupt for ridiculously small fees, and don’t think the predatory businesses haven’t figured this out.
Obviously, debt relief agencies are not required to submit their information to the government, and it is certainly not in their interest to allow any other companies access to their clients. Furthermore, the effects upon credit are limited – with immediate positive changes to be seen upon FICO scores – after debts are erased. Best of all, the costs are relatively insignificant. There’s none of the administrative fees that the courts force upon desperate borrowers, and many of the debt relief or debt settlement programs don’t charge anything for the initial consultation (which is why it’s best for all individuals to discuss their situation with a variety of companies and counselors). Again, some debtors have no choice but to declare bankruptcies, but, for anyone who thinks they have a shot at avoiding Chapter 7 protection, they should very seriously investigate the possibilities.
One of the many deficiencies with bankruptcy protection is that instant debt elimination – although, after recent changes in the laws surrounding Chapter 7, that happens less and less – does not create any changes within the borrower’s behavior. After all, though many debtors are at the mercy of financial mishaps and medical problems, most consumers got to this point because they kept spending beyond their means, and, if their collected debts are eliminated without any real consequences (credit card companies will still offer credit accounts after bankruptcy discharge, after all, even though the interest rates can be absolutely horrendous), why should anyone think that the habits of a lifetime would change?
Bankruptcy lawyers’ responsibilities to clients end as soon as the court trustee signs the papers that first sets up people into one program or another. Half the time, the attorneys often don’t even make a call once discharge papers are sent. The judge randomly assigned to the debtor’s case has even less to do with anything – a disapproving look, a tired remark about how too many people take advantage of the system. Debt relief counselors actually are counselors. They work with their clients to make sure the financial predicaments stay buried. The counselors are certified, after all, not only to negotiate with lenders but also to help advise the consumers on the best strategies for money management and debt management. They’ll talk with them about how to make a worthwhile budget (one that the borrowers can actually stay on top of; too many debtors, in a bout of self-loathing, either make things too stringent and impossible to follow over the course of years or, on the other hand, allow expenses for things like cable and magazines and dinners out that shouldn’t really be considered necessary) and the best methods to stay within that budget. They’ll counsel patience and diligence. The debt relief and debt settlement professionals will help the entirety of a client’s life and future, in other words, rather than simply take the money and run.
Nevertheless, much as debt relief and debt settlement professionals have been trained to aid borrowers manage a new life of proper money management, there’s a limit to how much any advisor can prevent lifelong habits of spending purposelessly from recurring without the borrower’s commitment. Debtors do need to take their financial destinies into their own hands. Avoid inessential purchases and think long and hard about every time you use a card for household expense. Budgets are key, of course, but it’s just as important to have long term plans for personal economy. Cut coupons, but also look into eventual investment plans. Don’t just assume the world is going to end before retirement comes knocking
Fortunately, when looking toward the future, the debt relief alternative also contains several advantages over bankruptcy. Once again, when an individual declares bankruptcy, to a large degree their credit will never be wiped clean again. Debt relief, on the other hand, doesn’t have nearly so negative an effect. A successful negotiation lowers credit scores for a while, of course, and there are notes recorded by the credit bureaus indicating debt settlement, but these are considered relatively beneficial by credit analysts and underwriters who tend to be impressed that debtors took the initiative to at least partially repay loans without government assistance (and, unlike bankruptcies, they won’t linger on credit reports for seven to ten years, depending on the specific Chapter). Taking into account how monumentally significant credit reports can be for all Americans – obviously, vehicle loans and home mortgages will depend upon such reports but, more and more, even employment opportunities study FICO scores – we shouldn’t need to underline how this should be a priority for every consumer. More than anything else, this should convince every debtor with the ability to look into debt relief as a preferred alternative to bankruptcy protection. Whatever has been done in the past, there’s no need for reminders of former financial embarrassments to show up on credit reports a decade into the future.
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