• Understanding Your Debt Options

    With national household debt totaling $13.3 trillion, a USA Today story published on November 16, 2011, examined some of the options available to the millions of Americans currently burdened by the amount they owe.

    The first option USA Today discussed were credit counseling agencies, saying, “Without trying to sell you something, they can show you how to manage your finances by cutting back on spending and keeping up with bill payments.” However, as Liz Pulliam Weston of MSN noted in August 2009 that only about one-third of the 3.2 million people who contacted National Foundation for Credit Counseling (NFCC) agencies were able to handle their finances on their own after a counseling session. Another third “were either too far gone for debt management plans to help, with too little income or too much debt, or had problems credit counseling couldn’t help and were referred to social services agencies because of issues such as a gambling problem, alcoholism or other addiction.”

    The final third enrolled in USA Today’s second suggested option for debt-management plans (DMPs), but as Weston noted, the dropout rate for DMPs averages at least 45%. The NFCC came up with another repayment plan, “Call to Action,” but some are simply too far behind to handle regular monthly payments.

    The third option presented was debt settlement, but even USA Today acknowledged that the industry has been in flux ever since the Federal Trade Commission approved a rule preventing debt-settlement companies from charging upfront fees before a settlement has actually been negotiated.

    The final option USA Today covered was bankruptcy -and that was also the option suggested by Weston in the MSN article because, as she said, “even if you desperately want credit counseling to work, it often won’t.” While filing for Chapter 7 or Chapter 13 might indeed be “a last resort,” as USA Today referred to it, the truth is that it still remains the safest and surest way for many Americans to get a fresh start on their finances.

    How many of these types of debt relief have you tried? What was your experience?

    Benjamin Brand Services – Chicago bankruptcy lawyer

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