Debt Elimination

Eliminating your debt is a great plan, but starting the process can be daunting. You can eliminate your debt in several ways. One is to methodically payoff each of your creditors as your funds allow. Negotiate a lower interest rate or principal amounts with your creditors to facilitate paying off your debt earlier. Eliminate some of your debt by declaring Chapter 7 or Chapter 13 Bankruptcy. Or use a combination of the three methods to eliminate your debt. Consulting with an experienced bankruptcy attorney in your area can put you one step closer to becoming debt free.

How do I go about eliminating my debt?

You can enter into an agreement with a firm to create a debt management program (DMP). Under that plan you would make one monthly payment to your plan's administrator, who would in turn pay your creditors. The plan might include negotiating with your creditors for lower interest rates, lower principal amounts, waiver of late fees, etc. It requires patience and dedication to complete a DMP. If you feel you lack either, Bankruptcy could be a better option.

You can also negotiate with your creditors on your own to try and reduce debt loads and/or interest rates on your debt. One drawback to this strategy is that if you are behind on payments, it could be difficult to negotiate. If you are current on payments, your creditors may not feel compelled to assist you in reducing interest rates or debt load. You might get better results from filing bankruptcy.

If you feel that there is no way that you can make the payments on your debt, then you should consider filing for bankruptcy. Chapter 7 liquidation can eliminate your unsecured debt. You pledge all of your assets, minus items that fall under the state or federal exemptions, and they are sold to satisfy the debt that you owe. Chapter 13 can help structure payments that you can afford so that you can keep most of your belongings.

Consulting a qualified professional bankruptcy attorney will help you make the decision that best fits your personal financial situation.

How do I stop collection calls?

The easiest way to stop creditor calls is to pay all your bills on time. If that is not possible, participating in a DMP should stop the calls after your creditors have posted the third monthly payment. If a creditor continues to call after the third payment is posted, send your account information for the creditor in question to your DMP administrator so that it can be investigated. Remember that your creditors are often large conglomerates where one department may not have been notified about your participation in a DMP.

If you have decided to negotiate with your creditors on your own, there is little that you can do to stop the calls unless the debt collectors have done something illegal, such as threaten you with jail or lie to you. If you feel that a debt collector is harassing you, contact the Federal Trade Commission, the consumer protection office of your state’s government or your state’s attorney general and the Better Business Bureau.

Debt collectors must stop contacting you under the automatic stay that will go into effect if you file for bankruptcy protections. All further communication with your creditors will be made through your Bankruptcy Attorney.

How will these options affect my credit?

If you are having trouble paying your bills, most likely you credit report already includes late or missing payments. Participating in a debt management plan could improve your credit rating if you are able to make consistent on-time payments. If you have been late in the past, most creditors will report you as "current" as long as you make your payments on time. If you have kept up on the payments on your debts, sending reduced payments under a debt management plan or getting interest concessions might affect your credit rating. Lenders may decide to not issue you new credit while you are participating in a debt management plan. If your credit report already reflects any late or missed payments, then the debt management plan (DMP) will likely improve your record by facilitating consistent, on-time monthly payments. Also, if you were late in the past, many creditors will report you as "current" as long as you make all of your monthly DMP payments on time.

Negotiating on your own might improve your credit report as you pay down debt. Creditors can report partial payments, interest rate reductions and charge-offs that may count against your credit score. Proceed carefully when negotiating with your creditors. It is always best to consult an attorney to help aid you in your negotiations.

Bankruptcy can be no more harmful to your credit rating than the financial circumstances that led to your filing. It will not make the negative information already on your report go away, but the debts will no longer be legally enforceable. Bankruptcy can be reported on your credit history for 10 years from the filing of the case. Assuming you have income, you should look more credit worthy after a bankruptcy filing than you did before.

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