GreenPath Debt Solutions, a national nonprofit financial advisory and education organization, recently developed an infographic to help consumers understand the positives and negatives of three of the most popular and least understood debt solutions: Settlement debt, credit counseling / debt management and bankruptcy. You can view and download the infographic at www.greenpath.org/infographics.
“There are so many advertisements, blogs, announcements and stories promoting credit card debt elimination services,” said Jane mcnamara, President and CEO of GreenPath. “It can be overwhelming and difficult to figure out which option is best for you.”
People often choose options based on advertisements or advice from family or friends. For example, you might have heard good things about credit counseling, but you have friends who have filed for bankruptcy. And these debt relief ads sound so tempting.
There is no perfect solution to getting out of debt –— every option has pros and cons. “It’s easy to get into debt, but a lot harder to get out of it,” McNamara said. “There are no silver bullets.”
The GreenPath infographic highlights three paths:
Debt settlement – Lawyers or debt settlement companies may be able to settle debts that are less than the total balance. This can be a viable option if you have a lot of debt that has already been written off by your creditors as bad. It might also be worth considering if you have access to a lump sum to make a large settlement payment. However, if your debt is up to date or less than 180 days past due, withholding debt payments to save for settlement can seriously damage your credit and may result in legal action. Charges are generally based on the amount paid, and consumers are generally required to pay tax on the amount remitted.
Credit counseling / debt management – Counseling is usually offered free of charge by a non-profit organization. Consumers are usually given a budget and an action plan, and the advisor can recommend a debt management program. A debt management program is a 3-5 year repayment program that pays off debt in full, often with significantly lower interest and credit charges. Not everyone is eligible, and there is a monthly cost for the program which typically ranges from $ 10 to $ 75. Success rates vary by counseling organization, but up to 50 percent of plan members are on budget. Credit generally improves as debts are paid on time each month.
Bankruptcy – There are two forms for individuals. Chapter 7 Bankruptcy clears unsecured debt and prevents creditors from suing you. A lot of people don’t qualify for Chapter 7, and it seriously damages your credit. United States Today cited the average cost of Chapter 7 to $ 1,500. Some choose to deposit Chapter 13 Bankruptcy, which is a 3-5 year repayment program that also prevents creditors from taking legal action. The cost is about double the price of Chapter 7, but the payments can be spread over the life of the repayment plan. Over time, credit damage can be mitigated as debts are paid on time each month. Unfortunately, most Chapter 13 repayment programs fail before debts are actually paid.
There are no easy answers to debt problems, so it’s important that you research your options carefully. Please feel free to view and download the infographic at www.greenpath.org/infographics.
About GreenPath, Inc.
GreenPath is a national, non-profit financial advisory and education organization that helps consumers solve their credit card debt, mortgage debt, student debt and bankruptcy issues. Their personalized services and actionable solutions have been helping people achieve their financial goals since 1961. For more information, visit www.greenpath.org.
Photo – http://photos.prnewswire.com/prnh/20150611/222484-INFO
SOURCE GreenPath Debt Solutions
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