When you're facing a mountain of credit card debt, the stress can be overwhelming at times. Collection calls, daily harassment, rude bill collectors, and nasty letters all add to an already intense situation. Consumers facing this kind of pressure naturally seek out the services of professional debt companies. But the search for reliable assistance can actually add to the stress! For example, just type in "debt help" on any search engine and you'll see page after page of results. There are literally thousands of debt companies out there. How to choose? How to tell the scams and schemes from the legitimate services? Should you consult with a non-profit credit counselor? One company tells you they can cut your bills in half. Another outfit says you really don't owe the banks any money at all and they can wipe the debt away for you. Who should you believe? Where should you turn?

Consumers face a bewildering range of choices when seeking debt assistance. As with any service, when considering a debt reduction program, "let the buyer beware." Yes, there are some good debt companies out there. But many are only in the business to take your money. Some actually leave you much worse off than when you started.

Where to start? Let's categorize the different types of debt program. This will cut down on the confusion and help you decide where to start your search. I'm assuming here that you are trying to avoid bankruptcy. I'm also assuming that you are struggling every month to keep up with the minimum payments on your debt obligations and have fallen behind or are about to start falling behind. Further, in what follows, I assume that you can't borrow against your home or otherwise pay off your debts off. In other words, we're talking about a financial rescue situation.

To simplify matters, let's look at debt companies in terms of three rough categories:

1. Debt management plans require 100% repayment of the debt through a structured payment plan. This is what non-profit credit counseling agencies do, as well as for-profit debt consolidators.

2. Debt settlement or debt negotiation plans require payment of part of what you owe, usually around 50% or less, with the remainder forgiven by the creditor. Virtually all of these companies operate on a for-profit basis.

3. Debt termination companies claim to wipe away 100% of your debt through special legal procedures, so your total payout consists only of their fees.

Right off the bat, let's cross #3 off the list. Sorry, but this one is a scam. You can recognize this type of company very easily. They make the claim that because of how our monetary system works, you never really borrowed any money in the first place! Their system is based on the false belief that credit card banks are operating illegally by extending credit to you. Absolutely do not give your money to one of these outfits! The fees start at $2,500 and go up from there. I spoke with one fellow who lost $15,000 in this scam.

Folks, there is no free lunch. The only thing such "debt termination services" will do for you is take your money. Their legal theories are total nonsense, and the courts do not recognize their arguments. These are the same people who also claim you don't need to pay your income taxes either. As tempting as it might be to try one of these services, you'll only get yourself in deeper trouble with your creditors.

That leaves #1 (debt management plans) and #2 (debt settlement). Debt management plans (DMPs) are offered through credit counseling companies that generally operate on a non-profit basis, and also through for-profit companies that use a similar business model. The essential idea is that you write one monthly payment to the agency, and they in turn distribute that money to your creditors. Companies offering DMPs work with your creditors to lower your interest rates so that more of your money goes toward paying off the debt. Of course, there are fees involved. The non-profit organizations are not free - a point that often confuses consumers. Also, "non-profit" does not mean the company is any good at what they do. Sometimes, a for-profit company can afford to provide a better quality of service because they can pay their staff a higher wage! So don't automatically think that non-profit services are good while for-profit services are bad.

When should you consider enrolling in a DMP? While many financial advisors seem to think that DMPs are the answer to every debt problem, in reality companies in this end of the business are basically acting like collection agencies for the banks. In the real world, a DMP only makes sense if you are in a relatively short-term financial crunch. Let's say you are between jobs but know that your income prospects will get better in 6-12 months. A DMP would make sense in such a situation because it would bring the temporary relief that you need until you can take your bills over again and start paying down your debts at a faster pace. On the other hand, if your situation is long-term and you don't see any light of the tunnel, then a more aggressive approach might make sense.

Debt settlement or debt negotiation can provide a more aggressive approach to debt reduction that makes sense for many consumers. It should be viewed as an alternative to bankruptcy. In fact, it's a very good alternative to Chapter 13 bankruptcy in particular. (For a detailed comparison between debt settlement and Chapter 13 bankruptcy, see http://www.new-bankruptcy-law-info.com.) It also gives consumers a fighting chance to work their way out of serious debt problems without the feelings of failure and loss of privacy that come with bankruptcy. One of the best features of debt settlement is that it involves a reduction in debt principal (the amount you owe), rather than just interest rates as with DMPs. The result is a much faster path out of debt. It's also a much more flexible approach than other types of programs, because it's the ONLY approach that allows for adjustments up or down in the monthly funding commitment. That's especially important for consumers with unstable finances.

Debt settlement isn't a perfect solution though. One of the major drawbacks is that the fees are usually quite steep, often amounting to 15% or more of your starting debt level. Also, settlement has a negative impact on your credit score (although your credit will take a hit under a DMP as well). However, when viewed as an alternative to bankruptcy rather than a cure-all for financial woes, it provides a good solution for many consumers. Essentially, debt settlement is really nothing more than a negotiated compromise with your creditors. It's actually a win-win scenario for you and the creditor.

Source:-http://www.buzzle.com

Piling up debt to a point that you may be forced to file bankruptcy is unfortunately, a fairly common occurrence. People from all social and economic classes have simply forgotten the tried and true principals of our forefathers that a penny saved is a penny earned and the result has become an avalanche of debt issues that have forced families into filing for bankruptcy.

Of course, it's not always your fault, unforeseen factors such as an illness or loss of income due to loss of work and other factors all come into play but regardless of the why you are between a rock and hard place financially you need to do something about it. And the sooner the better.

Debts can come in any number of ways from the most common like, credit cards, mortgages, and medical bills. On the other hand, if you are fortunate to have a little equity in your home a debt consolidation loan may be your saving grace but what happens if you can't go down that path to financial solvency?

Is bankruptcy your only way out?

Clearly, filing for bankruptcy is not a perfect solution to your debt problems, especially with the new bankruptcy laws making it much more difficult to wipe out all of your debt. Even after bankruptcy you may still be faced with a sizeable percentage of your current debt and you may even lose your home.

Ok, so what's the solution? Realistically, there is no easy solution but one alternative is to seek the help of a debt management professional who can map out a proper plan for you to get your head back above water. Another nice benefit is that they can also give you insight into how to avoid sinking your financial ship down the road by teaching you some tried and tested financial principles on how to manage your income.

Today, many organizations offer debt settlement programs for people fighting to recover from living beyond their means and what's nice is that you can contact and consult with them for the most part for free.

The process is also easy and pain free because in most instances they initially only require you to fill a simple form and they only collect the most basic information. At that point, you just have to sit back and wait for them to contact you and they will take you step by step through the whole process.

Of course, you should always contact a number of companies and then after consulting with each one you can then decide which one you feel the most comfortable with. Remember, your current debts won't go away on their own and so the sooner you do something about them the sooner you can get the burden of financial woes off your shoulders and move on with your life.

Source:http://www.buzzle.com

The amount of consumer debt in the Untied States is simply staggering. Individuals and families all across this country struggle everyday just to make ends meet. For many the answer to their money problems is implementing a debt management program that gives them the opportunity to build a sound financial future.

Once you start managing your debt you will see exactly why you have as much debt as you do and how it is affecting your monthly budget. What you find when you start the process can be quite an eye opening experience, because most people really have no idea where their money is going each month. Probably the most difficult part of this process is just getting started, but by using a few of the tips in this article hopefully we can point you in the right direction.


The first step of your debt management program is to list out all your debt. That's right, get a pencil and piece of paper and make a list of all your creditor's, the current balance you owe to each, the monthly minimum payment, the interest rate, and how much interest you pay them each month. Add up each column and look closely at the results. If you are struggling to pay your bills and make ends meet what you see could very well be the reason. Like most people most of your monthly cash is probably tied up paying on all that debt. What if that debt didn't exist, how much cash would that free up every month?

The next step to successfully taking back control of your money is to build a workable plan around a monthly budget to start paying down your debt. Because dealing with money is more of a psychological exercise for most people a good way to do this is to start with your smallest debt first. By paying it off first you will get the satisfaction of quickly paying off something off and keep motivated as you work your way through the bigger debts. Remember to roll the minimum payments of your paid off debts into the next one up the list until you are debt free.

As you implement and follow a debt reducing plan you will also need to be aware of your spending patterns. Paying down debt and becoming debt free can take time and patience and it doesn't take much to derail the whole process. This is where knowing the difference between your wants and needs can play such a large role in your success with money.

Look at it this way; you need a car because life in this country pretty much demands it. You don't need a $35,000 car with $400 plus dollar a month payments. You may want one but your surely don't need one. Apply this same line of thinking to everything you buy and the process will not only be much easier but will also go quicker. And once you are out of debt continue to follow this thinking.

A good debt management program is the key ingredient to successfully getting your financial life back in order. With a proper budget and strategy your money will start working for you instead of against you and you will have the financial freedom we all dream about.

Source:-http://debtmanagementarticles.net

It is a great feeling to get on top of your debt and know that you are able to make all your payments each month and not have to worry about debt collectors or paying for your groceries but now is not the time to stop doing the things that have helped turn your life around.

You will have become accustomed to using a budget to get your life in order and take control of your money and this budgeting should continue so you can move to the next level where you have additional money that can be used for investment and adding security to your life as you age.
You will probably have a different outlook on life where you understand the difference between wants and needs and as you will have experienced the lows of constant financial stress you will not want to go back there in a hurry.


So continuing along the proven path to financial security of reducing debt and managing the daily flow of your cash will give you a lot more freedom to build wealth now rather than focusing all your energy on reducing debt. It is a more positive phase in your life and you will see how much the debt encroached on your lifestyle and freedom.

You should have adopted an attitude whereby you will only ever spend less money than you earn and where you will never buy luxury or non essential items if you have to go into debt to get them.

You will only consider debt if it is to buy an appreciating asset that will deliver you more return for your money than the amount you are paying in interest.

This new attitude will also include better time management skills and that in turn will give you more time to do the things that you like.

While those times of excessive debt are extremely hard to handle the process of reversing your monetary situation is an education that will set you up for better things in the future.

Source:-http://articlecrazy.com