The four unequal paths back to financial solvency

By
Mortgage and Lending with January Financial

It's not something any of us would ever wish for. In fact, for many of us, it's our biggest fear. But in hard economic times, it's all too common to see people face what they'd prayed they'd never have to face. Maybe you are one of the people facing the day when your finances have become too much to manage, and you're wondering if there's even a way out from underneath your mountain of debt.

Well, there is - but not all deal-with-debt plans were created equal. Here is an outline of the four main routes people take when they've hit the wall and want the help of an expert to deal with their debts:

Option #1 - Bankruptcy

  • Negative credit report for ten years
  • BK-13 usually requires 100% pay back of principle amounts borrowed over a five year period
  • Attorney fees to file BK typically range between $3,000 and $5,000.
  • Amounts paid into a BK repayment plan cannot be accessed in the case of an emergency.
  • Typical payment on $40,000 of an unsecured debt would be in the $800 range for five years.
  • Provides some protection for other assets if BK judge allows those assets to remain in the consumer's possession.

Option #2 - Debt Management, Consumer Credit Counseling or some other Non-Profit Debt repayment program

  • Negative credit report for 7 years
  • Usually requires 100% pay back of principle amounts and usually some interest
  • Fees for the program are generally split between the lender and the consumer
  • Amounts paid into a non profit repayment plan cannot be accessed in the case of an emergency
  • Typical payment on $40,000 of an unsecured debt would be in the $1000 range over four to five years.
  • Creditors may seek any and all forms of collection for missed payments including collection agencies, judgments or garnishments.

Option #3 - Do Nothing

  • Negative credit forever, as accounts are resold to collection agencies perpetually.
  • Interest and penalties continue to accrue causing the balances to continually increase.
  • The cost of never ever being able to re-enter the credit system could far exceed the money saved by not paying over time.
  • Creditors may seek any and all forms of collection for missed payments including collection agencies, judgments or garnishments.

Option #4 - Debt Settlement

  • Negative credit report for 7 years.
  • Attorney contract guarantees amounts will be settled for less then 50% of the amounts owed on average.
  • Payment plans only last 18-48 months by which time the consumer is debt free and protected from any further collection efforts by the creditor.
  • Until accounts are settled, creditors may seek any and all forms of collection for missed payments.
  • Typical payment on $40,000 of unsecured debt would be in the $500 - $700 range for 3 - 4 years.
  • All fees are included and paid from the monthly payments requiring no additional out of pocket expenses from the consumer.
  • Some Debt Settlement programs allow the consumer to access their account in the case of emergency and borrow or withdraw cash without penalty.

Based on the attorney guarantee, the lower amounts of money coming from the debtor's pockets, and the emergency fallback potentials, we strongly prefer Option 4 over the others. Confirm with someone whose financial wisdom you trust, and then visit us for more information at www.januaryfinancial.com.

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