Hardship Program

What is the difference between a hardship program, debt consolidation, and bankruptcy?

I have big credit card debts, and heard someone on the TV news talking about a credit card hardship programs. How do these compare to debt consolidation and bankruptcy?

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Credit card companies offer hardship programs to people experiencing financial distress.

Credit Card Hardship Programs

Which debt resolution option is the best for you depends on several considerations, including your income, your balances, your interest rates, and your creditors. The first solution would be to call your credit card issuer and ask to be placed on their hardship program and state that you want to keep making payments but you would like the account to be re-aged and the interest rate reduced so that you can get back on track.

Banks do not publish the terms and conditions of their hardship loan or hardship programs. Indeed, some banks will not even acknowledge publicly that they offer hardship programs. Therefore, the only way to learn if your bank offers a hardship program is to call the customer service department and ask. Some banks' hardship programs will close the account. Others will allow you to continue to use the account. Be sure to ask about this detail. Because banks do not publish the terms and conditions of their hardship programs, these programs may change at any time, and may vary by the customer and their circumstances.

Debt Relief Companies

There are also several very good debt relief programs that may be able to help you if you are experiencing a hardship. If your credit card company does not approve you for their hardship program, you should look into a debt relief program. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take two to three years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt.

There is one major drawback to debt settlement programs, though. They damage your credit while in the program and for a year or two afterwards. However, if you are unable to afford to pay your creditors because of a hardship, the hit to your credit may be worth the benefit of ridding yourself of credit card debt. If you are interested in re-exploring debt settlement as an option, I encourage you to visit the Bills.com Debt Help section. This can put you in contact with a pre-screened debt settlement firm that may be able to assist you.

Consumer Credit Counseling Services

Another option to consider, if you are experiencing a hardship, is a Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would distribute the funds to your creditors, based on the new payment amounts.

There are several drawbacks to CCCS, though. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. Third, the average DMP takes around five years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.

Consumer Debt Consolidation

Consumer debt consolidation comes in four primary forms. The first is personal unsecured debt consolidation loan. Second, credit card debt consolidation can allow you to transfer balances from one or more credit cards to another, ideally with a lower interest rate. Third, if you are a homeowner, is a cash-out home refinance. Fourth, if you are a homeowner, is a home equity loan or line of credit. However, if you are experiencing a financial hardship you may have difficulty qualifying for debt consolidation options.

Each form offers positives and negatives. You may find that one or two types is more appropriate for you. Your goal is to find the debt consolidation solution that is best suited to your financial situation.

To learn more please visit What Are My Debt Consolidation Options?

Bankruptcy

Bankruptcy may also solve your debt problems. A Chapter 7 bankruptcy is a traditional liquidation of assets and liabilities, and is usually considered a last resort. Since bankruptcy reform went into effect, it is much harder to file for bankruptcy. If you are considering bankruptcy, I encourage you to consult with a qualified bankruptcy attorney in your area.

I hope this information helps you Find. Learn & Save.

Best,

Bill

www.bills.com/

1 Comments

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  • 35x35
    Dec, 2009
    Kourtney U.
    Very well explained. The article is a helpful guide to everyone especially nowadays some of us are experiencing financial dilemma. Oh, how the mighty have fallen – in an economy that is so dependent upon consumer spending, a recession usually spells doom for industries hinging on discretionary expenditures. For instance, amusement parks – when mass layoffs begin, the vacation budget is the first to get the axe. Large and small parks are struggling to get customers, and they're offering huge discount incentives, to travelers and locals, and parks that once took a cash advance to even get in are now struggling to get people in.
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