Eliminating Credit Card Debt Advice

Debt consolidation, equity loans, credit counseling, debtmanagement plans, even Chapter 13 bankruptcy – it doesn'tmatter which of these debt programs you're talking about.They all suffer from one fatal flaw, the number one problemthat causes most people to fail at eliminating their debtsthrough these techniques. Can you guess the problem?It's probably not what you're thinking. It's not the fees,interest rates, or the quality of the companies behindthese debt solutions. No, the number one problem with mostdebt programs is that they require FIXED monthly paymentswithout exception. This major flaw is the main reason thatvery few people make it through a credit counseling programor a Chapter 13 bankruptcy plan.

Do you make exactly the same amount of money each and everymonth? If you are like most people, the answer is probablyNO. It's easy to understand why. Salespeople, for instance,often experience ups and downs based on how much commissionthey earn from one month to the next. Seasonal workersexperience boom and bust times depending on the time of theyear (think retail workers getting lots of overtime aroundthe holidays). Overtime hours come and go depending oncompany workloads. Part-time jobs may offer hours that varywidely from week to week. And so on.

Now, what about your expenses? Do you spend exactly thesame amount of money each and every month? Sure, yourmortgage or rent and your car payments are a set amounteach month. But doesn't your utility bill go up and downdepending on the weather? What about your phone bill? Howmuch will you spend on car repairs over the next 6 months?Medical bills? Dental bills? Can you predict such variableexpenses with any accuracy?

If you have lots of room in your budget, with money leftover at the end of the month, then fluctuating income andexpenses are probably not a major issue for you. However,if you are struggling to make ends meet, living from onepaycheck to the next, then an unexpected expense candestroy your monthly budget.

People enter debt relief programs with the best ofintentions. Take credit counseling, for example. You entera program to get some help in bringing your credit carddebts under control. The monthly payment of $500 soundsgood. You're humming along just fine for a few months, thenwham! The water heater blows up. Time to shell out $800 fora new one. Unless you like cold showers, you'll need toskip the $500 payment to the agency this month, and part ofnext month's payment as well. Where does that leave youwith the credit counseling program? Back on the street,that's where. You simply CANNOT miss payments into thattype of plan and expect anything but failure.

Or look at Chapter 13 bankruptcy, where the court requiresyou to pay a set monthly amount to your creditors over a 3-5 year period. Even before the drastic new law went intoeffect, 2 out of every 3 people failed at Chapter 13bankruptcy. It will get much worse under the new law,because the court will set your monthly budget for you,based on what the IRS says it should be for your state andcounty. This is simply unrealistic, and once people realizehow bad the new law is, they will run in the otherdirection from Chapter 13. (Forget about Chapter 7, whereyou wipe the debts away. The new law will make it verydifficult to qualify for the old Chapter 7 fresh start.)Again, the big problem with most debt relief programs islack of flexibility. You cannot call your loan officer, thecredit counseling agency, or the court trustee and say,"Hey, my kid broke his leg and I had to pay the hospital$500 to cover my insurance deductible, so I'll need to skipmy debt payment this month." If you could, then these plansmight have a chance of working. But such inflexibleprograms simply do not reflect the unpredictable nature ofthe average household budget.

So is there any debt program that does provide thisflexibility? Yes. It's called debt settlement, or debtnegotiation. It's certainly not for everyone. Debtsettlement is an alternative to bankruptcy. It's not forpeople who can pay their bills in full without hardship.But it can be a real blessing for those seeking relief froma crushing debt burden.

The reason debt settlement is so flexible is simply becauseYOU control the cash. You build up money in a separatesavings account until you have enough to make a reasonableoffer to one or more of your creditors. Like any debtprogram, debt settlement has its downside and its risks,but no other program provides this level of flexibility.Because the monthly payment is going into a negotiationfund that you set up and control, a bad month simply meansyou have less money to settle with. If you can make it uplater, that's great. If not, that's life. When you haveenough to settle ONE account (usually between 35% and 50%of the balance owed), then you make an offer. If yourcreditor takes the deal, then you start building up fundsto knock out the next debt, and so on. It's the onlyprogram out there that recognizes a basic reality: Yourbudget should set the pace for your debt eliminationprogram. Not the other way around!

Again, debt settlement is not a magic bullet. It won't cureevery debt problem. But if you need to skip a month, oradjust up or down a little to reflect what's going on inthe real world, it doesn't mean the end of the program.It's truly a shame that the financial "experts" who haveset up the bankruptcy rules, consolidation loan terms,credit counseling plans, and debt management programshaven't figured this out yet. If they would just recognizethis fundamental problem, then the success rate on theirprograms would increase dramatically and they could stopmisleading the public about what works and what doesn't inthe world of debt relief.