Bills.com > Manage Debt > Deal with Debt > Articles About Debt Help > Debt Solutions: Bills.com White Paper on Debt Solutions

Debt Solutions: Bills.com White Paper on Debt Solutions

By Brad Stroh Mar 18, 2013
Share on Facebook 53 Comments
Escape the debt ball and chain. Get debt relief help now!
HIGHLIGHTS
  • Learn about Credit Counseling and Debt Settlement.
  • Let your credit concerns and financial health determine what program is right for you.
  • No single debt relief option is perfect for everyone.

Debt Relief Options: Compare what is best between Consumer Credit Counseling Services and Debt Settlement and which may be the best choice for your debt relief needs.

Ten years ago, a consumer struggling with unaffordable unsecured debt would likely have only two options — hiring a Consumer Credit Counseling Service (CCCS) or filing for bankruptcy protection. Over the past decade, however, two important changes have occurred that affect financially distressed consumers’ choices in finding debt relief.

First, a new approach to resolving consumer debt, called “debt settlement” or “debt negotiation,” has become widely available as an alternative to CCCS and bankruptcy. (The terms “debt settlement” and “debt negotiation” are used interchangeably by the industry and mean the same thing.)

Debt Relief Options
Background
CCCS History
CCCS Pros
CCCS Cons
Debt Settlement History
Debt Settlement Pros
Debt Settlement Cons
Cost Comparison
Alternative Solutions
Conclusion

Second, a law enacted by Congress in 2005 made receiving relief from the bankruptcy courts much more difficult for many Americans. The new law placed stringent restrictions which greatly limited who qualifies for discharge of debts under Chapter 7 bankruptcy and it established onerous new filing requirements on petitioners and their attorneys.

The changes in the bankruptcy code have led consumers to turn to either CCCS or debt settlement firms seeking a solution to their debt woes. Unfortunately, due to the questionable, and sometimes fraudulent, claims some companies make online and in radio and TV commercials, it can be difficult for consumers to make an informed decision about which debt relief option they should choose. This article discusses the similarities and differences between CCCS and debt settlement. It explains the benefits, drawbacks, and overall costs of each option, with the goal of helping you better understand the available debt relief programs, so you can decide which plan is the best choice for you and your family.

Next: Consumer Credit Counseling Services History

Rate this article
Not helpful
Awesome
Share on Twitter Share on Facebook

Comments (53)


Lydia E.
Rivervale, NJ  |  March 18, 2013
I have 3 credit cards that add up to about $9,000 all together (not including student loans, which are about $14,000). I want to pay off all of my credit card debt at most in a year, but the interest on the credit cards are ridiculous. Even when I'm doing my monthly payments, it doesn't do much. I've tried to transfer my balances to a promotion card where they don't charge interest on any balance transfers for 12 or so months, but my credit score was too low (670) that I was not approved for it. What are my other options? I know that i can definitely pay off my credit card debts within a year if i didn't have such high interest rates on them. Any suggestions?
Bills.com
March 19, 2013
I recommend that you look into credit counseling as a solution. Whether credit counseling can lower your interest rates enough for you to meet your one-year payoff goal, I don't know. Regardless, it should speed up your time to becoming debt free, if your creditors are willing to participate.
Roberta K.
Upland, CA  |  January 02, 2013
I have searched your site for a possible connection with my question but did not find one. My father passed away three months ago. Since then, my mother has been having financial difficulties. She paid off most of their open accounts but there is still about three outstanding accounts that she is not able to pay with her monthly income, which is social security and dad's pension. Mom has contacted the credit card companies and they will not work with her. Their home is paid for and she has two vehicles, one of which belonged to my father and mom can't bring herself to sell it at this point. That's all she owns. She basically lives month-to-month on the social security and pension income. My question is, can the banks/credit card companies get a judgment against her and take her vehicles? She lives in Michigan. I know there's a chance that they might be able to put a lien on her home, but she has no intention of selling or refinancing at this point, she is 73 years old. What would you suggest? Thank you in advance for your help.
Bills.com
January 03, 2013
Can a creditor file an action against your mother and obtain a judgment? Yes, assuming the creditor has a right to do so and follows Michigan's civil procedure rules. The real question you should ask is, "Can a judgment creditor perfect the judgment and collect?"

Some debtor property is exempt from judgment-creditor actions. Under Michigan law, a debtor can use an exemption of $3,250 for vehicles, and $52,950 for a homestead if the homeowner is elderly or disabled. Also, under federal law, Social Security benefits are exempt from judgment-creditor garnishment. It is safe to assume the pension is exempt also.

If one of the vehicles you mentioned has a Blue Book value of $3,250 or less, the judgment-creditor cannot use a writ of replevin or similar legal action to seize the vehicle. The judgment-creditor can place a lien on the property, but if one does so that is not a concern until your mother sells the property. When she sells the property, she can use part of the sale proceeds to pay-off the lienholder.

What to do? I have an incomplete view into your mother's finances including the amount owed each creditor, so the smartest course of action would be for you to make an appointment for your mother with a bankruptcy lawyer. She needs to discuss her situation in detail with someone who can ask probing questions, and explain her options. I am not suggesting bankruptcy is the right answer here, but a Michigan bankruptcy lawyer will share more detail than I have in these four short paragraphs.
James S.
February 10, 2012
I have an account with a balance of $12,651.39 with an interest rate of 29% and I want to do a settlement with the company. They will not do a rate reduction for me. My only options are a settlement or go through a credit counselor. My credit score now is about 650-670. They want to settle for $6,960 and they will report on my credit report a settlement. I have never been late on any payments. I just have a high debt to income ratio. I want to know how bad it will affect my credit score. I have read that a settlement on your report is just as bad as a bankruptcy.
Bills.com
February 10, 2012
It is untrue that a debt settlement harms a credit score as much as bankruptcy. Please read the Bills.com resource Foreclosure, Delinquency, Debt Settlement & Credit Scores to learn more.
Avatar
James S.
February 10, 2012
Thanks! Would you recommend me doing the settlement if I am not planning on making any large purchases for at least a year? I am just worried that it will drop my credit score down so low that it will take years to build it back up. Even though 650-670 isn't great, I am on the verge of having a 680.
Bills.com
February 12, 2012
It isn't possible to know exactly how long it will take your credit score to improve after a settlement, although there will certainly be a negative impact in the short term. You mention that you can settle for about half the debt, which is a big savings. Making payments on time and keeping your credit utilization down to the 30% level are important factors in building a good credit score.
CJ M.
Clovis, CA  |  February 06, 2012
I lost my job (laid off) last July & my medical benefits as a result. Several months later I needed a biopsy done after a spot was found on a mammogram. I borrowed nearly $3000 to pay for service the day of, so that I would get the "pay at the time of service" discount. Otherwise, they demanded repayment within 4 months...which equated to $795 a month. I was told there "could be additional charges that they cant foresee until they get in the room to do the procedure". Subsequently I've been billed an additional $3500. In addition to my outrage over their misrepresentation of the facts and the charges, I am now told that they can only allow for a 9 month repayment, which requires $295 a month as a payment. As a divorced unemployed mom, this is not even close to doable. I'm now in the process of applying for a financial hardship. My question is with this and the other facility that I'm trying to negotiate with, what if I can only manage $20 or $30 a month?? Can they reject that and send me to collections even though I'm attempting to pay them?
Bills.com
February 06, 2012
Yes, a creditor can send you to collections if you pay less than the minimum amount. Please see the Bills.com resource If I Pay a Small Amount on My Debt, Can I Be Sent to Collections? for a discussion of this issue. I encourage you to ask any follow-up questions you may have on that page.
Darrell K.
Canton, MI  |  December 30, 2011
My divorce was final in 2010. My wife and I had 2 accounts where I was the co-signer. She has filed for Chapter 13 bankruptcy and the creditors have come after me. One has filed suit with the courts. The divorce decree said that we should be jointly responsible for debts. Will I be totally responsible for this debt due to this? Can I suit her for some amount?
Bills.com
December 31, 2011
The answer to your first question is "yes," because as a joint debtor, you have liability if the other joint debtor files for bankruptcy. The rules under Chapter 13 are different if the debtors are married, but because you are not, you are not protected by the marital exception. Regarding your second question, the answer is dependent on your state's laws and court decisions. See the Bills.com resource Chapter 13 Bankruptcy for general information. Consult with your divorce lawyer for a precise answer.
Zack T.
September 27, 2011
One of my credit accounts was charged off and the debt was bought by a collection agency. "account charged off" is shown on my credit report. When I tried to call the creditor, I was declined to further discuss my account,and sent to talk to the collector. What do I do when the creditor refuses to talk to me regarding the debt?
Bills.com
September 27, 2011
Collection accounts — a debt owed a creditor — can be bought and sold like baseball cards, and often for about the price of a baseball card. The creditor may not have a right to your collection account because it sold your account to a collection agent. That collection agent may sell it to another, and so on. Negotiate a lump sum settlement with the collection agent. Start negotiations at 15 cents on the dollar, and work your way up from there.
Avatar
Ade A.
Herndon, VA  |  November 01, 2011
I have debts that is been collected by the State of Maryland Central Collections unit, the debt is for $14,000 in unpaid tuition submitted by the University of Maryland Baltimore County. What are my options? I am in a dilemma, my Credit Score Averages 600 right now, I do not have any other delinquency, although I have had some negative reports in the past, but they have all been paid off.
Bills.com
November 01, 2011
Regarding your Maryland wage garnishment, see the Maryland District Court Wage Garnishment Web Page, which summarizes your rights and liabilities as a Maryland resident.

Regarding your credit score, you need to work on creating a strong credit history.
Avatar
Trust V.
September 10, 2012
Hi I have had a growing student loan for 12 years because of my financial mess I have been unable to pay it back and have deferred the loan many times. The interest on the student loan has almost doubled, I honestly do not want to shirk my responsibility for this loan, however I would like to reduce or reverse the interest..what are my options?
Bills.com
September 11, 2012
The only way to reduce the interest that I can think of is to try to negotiate a settlement with the lender. If your loan is a private student loan, a settlement is a possibility, although it would require you having enough money to pay the lender a lump sum.
AMY V.
Los Angeles, CA  |  August 22, 2011
I have a couple of items on my Credit report that I am currently disputing as incorrect and fraudulent. TransUnion has stated they are my items and will remain on my file.... I've tried to resolve these inaccuracies and have them removed/deleted from my credit report. First I sent a letter directly to Bank Of America to dispute these charges and to validate the debt.... ( no response w/ 30 days ). Then 45 days later I sent a 2nd letter requesting they delete these debts since they failed to response or validate the reporting and debts. ( they failed to reply or remove item ).... Now they are in violation of CA law ( credit validation )... What should be the next step??? Contact the credit agencies (trans, Experian , Equifax ) and send them copies of the letters I sent to BOA and informed them that they failed to comply???? Or contact an Attorney for legal assistance and go after BOA and Credit agencies??? Please help me with advice.
Bills.com
August 22, 2011
Amy, I think that you should speak to an attorney about violations of the Fair Credit Reporting Act. You can get a free consultation. Most of the attorneys that work on these cases do not charge you a fee, but get their fee from the party you sue. This means that the attorney will only take your case if he or she feels that your case is a winner. Please report back to Bills.com and let us know how your case goes.
Anita P.
Saint Joseph, MO  |  July 10, 2011
I recently applied for housing assistance through the Housing Authority here. The case manager asked if I had ever rented through housing before. I said yes, about 28 years ago and told her where. She needed to go check the "bad records" and be right back. She came back in and said I owed rent from back in 1986. I told her that that was so long ago, I couldn't say that it was owed or not owed. I told her I don't ever recall getting any billing for it. She told me they could not help me since the debt was owed. I had applied last year through the same office and was accepted and given a voucher from the same case manager. When I asked her about that, she just said "it must have been overlooked" and they are not responsible for those kind of errors. She said the ledger looked like the amount had been turned over to collections and that I could not be allowed to be put on the waiting list for housing. What should I do?
Bills.com
July 11, 2011
I suggest you request to speak with a supervisor at the Housing Authority. See if he or she is more flexible, can explain why no problem showed up when you applied before, or if any proof can be supplied showing that you owe the money. If that doesn't solve your problem, contact your elected representatives. If the Housing Authority is a city agency, contact the mayor's office and your city councilmember's office, too.

Readers: I welcome your constructive thoughts and ideas on how Anita can resolve this issue.
Avatar
Mary C.
Wilmington, DE  |  August 19, 2011
She can (and must) enter into a repayment plan with the Housing Authority that she owes money to and they will contact the HA that she is attempting to secure housing assistance in. The reason it probably did not show previously is because HUD was in the process of making all past bad debt avaiable to all HA's.This is now in place and when the new HA enters her information into the system a flag immediately appears.
Tricia T.
Cumming, GA  |  May 28, 2011
I filed for ch 7, and have not reaffirmed the debt on my car. I have not made any payments to my loan (from a credit union) since I filed for ch 7, and I am expecting a discharge in a few weeks. I filed in February and my hearing was April 13. I read somewhere that the car could be repossessed after 30 days. Is this true? Or do they have to wait until my case is discharged? And can they repossess the car without giving me any notice? I don't want to keep the car...but I don't want to come out of work and find it's gone and I have no way home, either!!!
Bills.com
May 31, 2011
A secured creditor can ask the BK trustee for permission to repossess the security, even before the bankruptcy is discharged. It will do this if the person filing checks off that he or she does not want to retain the security. I recommend you start making alternate transportation plans, to avoid having no way home from work, should they repossess the car.
Luka G.
Norfolk, VA  |  May 06, 2011
I feel i am not in a horrible situation at the moment, but i am young(24), and have a "decent" credit score(650). However, i do have around 10k left on a car worth about 6k as well as less than 3k left in small loans and small credit card(1) balances. I stay fairly on time with all the payments. I do foresee my pay fluctuation in about 6 months from now and was looking to consolidate the 3k in debt, and pay it off(basically paying the same amount each month i am paying now, but on just one consolodation loan). However, with my great plan, the bank said my debt to income ratio did not qualify me for this loan. I mean, these few different companies are getting money, wouldn't the bank jump right on this? It just drives me crazy that i am trying to A, stop a possible bad situation, B, trying to do things the right way. What can i do? I rent an apartment, i have 1 car, 1 car payment. I just do not want to ruin my credit over less than 15k in debt, its prob more around 13k.
Bills.com
May 09, 2011
Unfortunately, as you discovered, lenders are only willing to make a loan to you if you can meet their requirements for debt-to-income ratio (DTI) and credit score. Since the collapse of the credit market a few years ago, it has become very difficult to obtain an unsecured loan at a reasonable interest rate. While you can demonstrate a history of making your payments, to protect itself from potential default, the bank looks at your DTI.

If you were carrying a lot of unsecured debt that had high interest rates, I would suggest you look at a credit counseling program. However, with the amount of debt you are carrying, that route is not likely to offer much relief.

As you are concerned about your ability to maintain your payments, once your income fluctuates, maybe it makes sense to look into refinancing your car note. If you can extend the term, that could bring down your monthly payment. Another possible solution would be to apply for a credit card that allows you to transfer balances to it. This only makes sense if the interest rate is lower than your current debts and the fees that the new card charges are not excessive. If things get to the point where you feel you will not be able to maintain your payments to your creditors, make sure to call them. You may be able to work out a lower monthly payment that will keep you from defaulting and harming your credit rating.
Waiting for comments to load Loading more comments
Thanks for your feedback!
 
Articles Ask Bill

Tool Box   Easy to use resources to help you find solutions to your money questions

Thank you for subscribing!