Unsecured Consumer Debt Elimination, New Age Snake Oil

by David Jenyns on August 23, 2011

For those who have lived long enough and spent the time to pay close attention you will notice that trends usually appear in cycles. What is cool now will probably be cool once again 10 years from now. Just look at all the new fashions people are wearing these days. You might recognize many of them from your own youth, or the youth of your parents. This is the natural order of things. Folks become crazed with something until it ultimately burns itself out, but as soon as enough time has gone by somebody decides to bring back those old trends to go for another round on a fresh number of faces.

This process of cycles does not limit itself to simply fashion. It can also be observed in other facets like debt management. To understand this, you need to understand the various forms of credit card debt relief. The oldest of these forms is Bankruptcy. This was designed for individuals who fell on hard times to avoid being shot, hung or sent to debtors’ prison. As time went on however men and women seen that this was a device that might be used and exploited. Folks would intentionally overextend themselves and when they hit their max capacity, they would seek bankruptcy relief and get everything wiped away.

For years banks lobbied to get this changed. Around 1995 the bankruptcy abuse act was established. This put stronger rules on who could and could not qualify for a chapter 7 bankruptcy. It put a larger emphasis on a chapter 13 bankruptcy, which is actually a repayment program where men and women could end up paying eighty percent or far more back to the lenders.

To balance out the losses they had been seeing from the rise in bankruptcies, banks started to increase interest rates. After time the interest rate caps rose to as much as thirty percent or more. This put many people who had been still paying the money they owe either on a never ending cycle of paying minimum payments and getting nowhere, or on the brink of falling behind. Because of this the consumer credit counseling program came about. In most situations these agencies were run, or at least backed by the finance institutions themselves. What this enabled men and women to do is to stop using their credit cards and put them into this program. The agency would seek to lower all the interest rates then you would make one monthly payment to the agency who would disperse that out to the creditors on a monthly basis.

The good part regarding this program is that you were capable of paying down the debt in five to six years. That is obviously considerably better than taking thirty or greater years. But, the downside was that the payment you had been making was typically the exact same as your minimum payments in the very first place, so in the event you had been in a position where you had been going to get behind, then this would not stop this.

Once more with most things, people became greedy and as increasingly more people chose to ring up their cards then enter them into a CCCS program seeking zero percent interest forever, the credit card issuers changed many of their procedures. Several of them did away with 0 % interest rates or restricted them to a single year. They also started to reassess men and women after six months to a year, to ascertain if they still qualified for the program.

Subsequent came the debt consolidation loan boom. As property values started to increase, lenders discovered more and more folks with equity in their houses that could possibly be accessed. Therefore began the home equity loan boom. A large amount of people started to utilize their homes equity and consolidate their debt into one lower monthly payment. But again greed started to dominate. As the pool of possible individuals who qualified for conventional loans dwindled, the industry started to produce new adjustable rate loans for people who wouldn’t have typically had the opportunity to receive a loan. This became the beginning of the housing crash. As with every bubble, if you continue inflating and blowing it up ultimately, it’s likely to pop. This is exactly what happened. As these adjustable rate loans started to change, several of them tripled the interest rates making the property owner to go delinquent and in several instances lose their homes.

As you might know there are always going to be those people who will benefit from individuals who are in dire straits. We generally call these individuals “snake oil salesmen” coined in the early years when individuals would sell make believe potions to remedy almost everything from thinning hair to arthritis. These get wealthy quick sort of men and women would sell this tonic to people anxious for a cure. Quite often really quickly, folks would recognize that this was a scam, but not before many people would have fall victim to them. If the salesperson was not hanged, he’d lay low, traveling from town to town until individuals forgot about him as well as the fact he was a sham, then he would pop his head up again selling his snake oil to people who didn’t know it was a scam.

Just as these snake oil salesmen, you will find men and women within the debt relief programs industry that try to make the most of individuals in desperate circumstances. One sort of this get wealthy scam is what is called debt elimination. The concept of this is that you hire an attorney who will try to sue the collectors stating that the debt is not valid. They try to make use of old loopholes within the law proclaiming that it is unlawful how they calculate interest rates, or forcing them to “prove” you owe the debt. Regardless of what these men and women tell you, ask yourself this one question. Did you charge the debt? Did you benefit from using the credit card by making purchases for items which you owned? Unless someone stole your card and made purchases you didn’t know about, or the bank added charges to your bill that belongs to another person, in almost all instances the answer to that question is going to be yes. That being stated, you’re likely to be challenged to convince a judge the debt isn’t yours and you don’t owe it.

The final form of debt consolidation program is debt negotiations. There are essentially two kinds of debt negotiations. The very first is called Debt resolution. This is where you hire a law firm to negotiate with your creditors, for you, in an attempt to get them to agree to accept less than your full balances. The main problem with this form of debt relief, it that in many instances the debt settlement lawyer will charge a retainer in addition to a monthly legal fee in advance before any settlements have been reached. This is typically on top of their settlement charges. Although it may well appear reasonable to pay a lawyer to legally represent you, what lots of people do not understand is that the attorney won’t represent you in court. The truth is, several of them will not even help with answering the summons. All they’re representing you for is to negotiate your debt and that’s it. So basically you are paying them extra to do absolutely nothing.

The next type of debt negation is referred to as debt settlement. As with the above example, this is where your credit card debt is negotiated for much less than what you presently owe by a qualified debt settlement company with a proven background.  Just as with the attorneys you’ll find those debt settlement companies which will attempt to take fees upfront. Beware, it goes against existing regulations. Any reputable settlement company will in no way charge you for their services before debt has been settled.

It actually doesn’t matter what type of debt relief you decide to go with, in the end you will need to be properly informed. A reputable company will do everything they are able to to make sure you know all of your options and have a clear comprehension of all of them.  They will not attempt to push you into anything and will go into great detail when examining your case. If you are trying to find debt relief, do your research and make certain you’re dealing with a business that is willing to follow the regulations, not charge you any fees until a settlement has been reached, and who will ensure that the alternative they offer you is truly the very best choice for you.


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