Bad debt advice is critical for any individual who has defaulted on one or more credit agreements. Medical bills, unpaid credit card debt, unsecured loans and repossession deficiencies are becoming increasingly common and will result in pursuance by both creditors and collection agencies. However, devising a suitable debt free plan and understanding the law can help to alleviate much of the financial pressure.
Bad Debt Advice
It is important to get consumer debt help from a non profit debt counseling service. They not only provide help producing a suitable budget for the client, they will also provide guidance on the various debt relief programs available. The objective of a Debt Management Plan or debt settlement program is to address the imbalance between income and expenditure.
Statute of Limitations Law
It is generally the case that creditors can no longer demand payment if more than seven years have elapsed since they received payment. A black mark will no longer show on the borrower's credit report. The timeframe will vary considerably between states so it is important to get advice from a non profit debt counseling service in order to clarify matters. Don't acknowledge or pay a debt that has lapsed.
Debt Free Plans
- Debt Management Plan. Although there is no reduction to the principal (amount owed), a repayment schedule is produced based upon affordability. Repayments continue until the balance is completely cleared. Most creditors are prepared to freeze further interest and charges. This source of consumer debt help is best suited for those with more modest personal debts.
- Debt settlement program. Following bad debt advice from a professional negotiator, it is possible to write-off up to 50% of the principal. The remaining debt will be repaid over a period of 12 to 36 months. The management fee is about 15% of each monthly contribution. Beware of providers that front-load their charges as this can cause problems further down-the-line.
- Filing bankruptcy. Clear all eligible unsecured debt and become debt-free in just 4 to 6 months. Those filing under chapter 7 won't need to make a monthly contribution to creditors. However, in order to comply with the new law, the debtor's income must be below the state median.
The sooner that bad debt advice is sought, the less serious financial difficulties will become. If budgeting fails to fully address an income/expenditure imbalance, consider a Debt Management Plan or debt settlement program. Don't make the mistake of paying debts that have already lapsed under current statute of limitations law. Early consumer debt help will prevent problems worsening.
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