Consumer Debt Solutions

Americans in record numbers are finding themselves in over their heads with credit card debt. Recent changes in the way companies are handling consumer credit, such as raising minimum payment amounts, charging interest rates as high as 32% if a customer misses a payment or is even late on a payment, and charging high fees for everything, have helped propel record numbers of bankruptcies. But is bankruptcy the best solution? The simple answer is yes and no.

There are a number of alternatives to bankruptcy (which has a disastrous effect on your credit score and in many cases, your self esteem) that can get you out from under the crushing weight credit card debt can inflict. The three most common are debt roll up, debt settlement, and consumer debt counseling.

Here is a look at one of the alternatives to bankruptcy, consumer debt counseling, also called counseling services, and consumer counseling. Consumer debt counseling is a system whereby a third party - the credit counselor - arranges a payback schedule with your creditors, and often arranges a reduced interest rate and stops late charges. Then, instead of paying the creditors directly, you send money to the counselor who then makes payments to your creditors.

So this is how it works:

You set up a meeting with one of the many consumer counseling services available both on and off line. This meeting could be in person, over the phone or on line. The purpose is to take a look at where you are financially and then to determine what you can reasonably afford to pay each month. This will determine the length of time you will be in the program.

Your counselor will usually be able to get your creditor to back off with the collection letters and phone calls, and will probably be able to negotiate a lower interest rate, and may be able to get your debt "re-aged" to reduce or eliminate your late payment fees.

The debt counselors are paid in part by you via a monthly percentage of your payments, and they are also paid in part by the creditors. This may come as a surprise to many people, but if you think about it, the creditors want to avoid you going bankrupt as they will not get paid back anything. If they can fund a third party to help you get out of debt without filing bankruptcy, it is in their best interest. For this reason, sometimes consumer debt counselors are called nothing but glorified debt collectors - which in a way they are - but they do provide a valuable service in that they get folks out of debt, and help creditors recoup their losses too.

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Consumer Debt Solutions |