Need Help With Debt

The Importance Of Debt Reduction

Even with little or no extra money to spare, paying off credit card debt is a worthy goal. With less debt, you’ll have a better shot at achieving other milestones that matter to you, like buying a house.

Eliminating debt takes hard work, patience and careful strategizing, especially when money is tight. Choose the method that best fits your circumstances and stay positive, knowing that with time and effort debt freedom will come.

How Accc Provides Help With Debt Problems

In addition to our free credit counseling services, we also offer counseling on bankruptcy, housing issues and student loans, as well as financial education materials and a debt management program.

For many of our clients who need help with debt problems, a debt management plan is the most effective way to get out of debt for good. Under this arrangement, you will make a single payment each month to us and well pay your bills and loans on your behalf. This ensures that your creditors are paid on time each month, and it gives us the opportunity to work with them to potentially reduce your interest rates, finance charges and other fees. The result: we may be able to help reduce the amount you owe, enabling you to pay it off faster. Most of our clients on a debt management plan are able to get out of debt within five years or less.

What Practices Are Off Limits For Debt Collectors

A debt collector may not:

• Contact you at inconvenient times, for example, before 8 AM or after 9 PM, unless you agree to it.
• Communicate with you at work if you tell the debt collector your employer disapproves.
• Contact you after you send a letter to the collector telling them to stop, except to notify you if the creditor or collector plans to take a specific action.
• Communicate with your friends, relatives, employer, or others except to find out where you live or work.
• Harass you with repeated phone calls, profane language, or threats to harm you.
• Make any false claim or statement that you will be arrested.
• Threaten to have money deducted from your paycheck or to sue you, unless the collection agency or creditor intends to do so and it is legal.

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Consider The Snowball Method Of Paying Off Debt

This involves starting with your smallest balance first, paying that off and then rolling that same payment towards the next smallest balance as you work your way up to the largest balance. This method can help you build momentum as each balance is paid off. Understand the pros and cons of this debt pay down strategy by reviewing the Snowball versus Avalanche methods of paying down debt.

Help When You’re In Debt

• There are several free services that can help you if youre struggling with debt.
• Laws are in place to protect you from being treated unfairly by debt collectors.

What the ACCC does

• We help consumers and businesses understand their rights and responsibilities.
• We investigate businesses where they might be breaking the law.

What the ACCC can’t do

• We dont provide financial advice or counselling.

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What Debt Wont Be Erased By Filing For Personal Bankruptcy

Filing for personal bankruptcy usually wont erase child support, alimony, fines, taxes, and most student loan obligations, unless you can prove undue hardship. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually doesnt let you keep property when your creditor has a lien or financial interest in it.

What If Im Having Trouble Paying My Car Loan

Most car financing agreements say a lender can repossess your car any time youre in default and not making your car payments. They dont have to give you any notice. Before you can get back your repossessed car, you may have to pay the balance due on the loan, plus towing and storage costs. If you cant, the lender might sell the car.

If you know youre not going to be able to keep up with your loan payments, you might be better off selling the car yourself and paying off the debt. Youll avoid the costs of repossession and a negative entry on your credit report.

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Mortgage Forgiveness Debt Relief Act Of 2007 Extended Into 2018

The name of this program often confuses people. They think theres a program where the government forgives mortgage debt. But thats not what the program does. Instead, it ensures that debt canceled by a mortgage lender on the sale of a primary residence is non-taxable.

Basically, this law is designed to prevent people from being forced to pay taxes after a short sale. When part of your debt is canceled by a lender, you usually must pay income taxes on the canceled portion. The only way to avoid paying taxes is to file for tax exclusion.

Around the time of the mortgage crisis, Congress created the Mortgage Forgiveness Debt Relief Act of 2007. This act automatically qualifies homeowners for the income tax exclusion if they have canceled mortgage debt on their primary residence.

For example, lets say you have a short sale on your home. You sell the home for $50,000 less than the remaining balance on your mortgage. In normal circumstances, that $50,000 would be treated as taxable income. But, as long as you fill out Form 1099-C and the amount forgiven is less than $2 million, you qualify for the exclusion.

The program has also been extended through 2018. No word yet on whether it will be extended again for 2019.

Tip No : Make Sure The Company Is Accredited

Oftentimes, debt relief providers are accredited by a trade association or approved by a government agency. Both are good signs that a company is reputable.

Trade associations are business cooperatives within a certain industry. A business must maintain a high ethical standard to be a member of the association. Credit counseling agencies may belong to the National Foundation for Credit Counseling or the Association of Certified Debt Management Professionals. Debt settlement companies have the American Fair Credit Council. These associations mean that the company must live up to a minimum ethical standard. You can have peace of mind that the company will provide the service that they claim.

Government approval is also a good indicator of a reputable company. For instance, if you need mortgage debt relief, find a HUD-approved housing counseling agency. HUD approval means that the housing counselors get special training and must adhere to certain standards.

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Pay More Than Once A Month

Pay your credit card bills more than the required once per month. This may make it easier to stay on track of how much you owe. Paying your credit card bill regularly may also lower your balance/utilization ratio. The credit utilization ratio is the percentage of your total available credit that is currently being used. The utilization ratio is one of the components used by credit reporting agencies to calculate your credit score.

How Can I Tell If Its Legitimate Help Or A Scam

Unfortunately, not every company that claims they can help you with your debt is honest. You dont want to fall prey to a scam, so how can you differentiate between the real help and the scams? Here are a few good indicators that a company is legitimate:

• Nonprofit status
• Be in business for at least 7 years
• Have a state license
• Have certified credit counselors
• Be a member of the AICCCA or the NFCC

A major red flag to watch out for is if a company is trying to charge fees upfront or not willing to waive fees for hardship. This could be a sign that the company is just trying to make money off of your debt without really helping you.

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Settle For Less Than You Owe

You can also call creditors and negotiate a settlement of your debts, usually for a lot less than you owe. While its possible to take care of this yourself, an array of third-party companies also offer debt settlement services for a fee.

While paying less than you owe and escaping old debts may seem smart, the Federal Trade Commission does mention some risks. For starters, some debt settlement companies ask you to stop making payments on your debts while youre negotiating better terms, which can negatively impact your credit score.

Why this works: Youll only pay a portion of what you owe and can move on knowing you no longer owe those creditors.

How to start: Contact your creditors to offer settlements and if they agree, get the terms in writing. Or you can hire a reputable debt settlement company to do the legwork for you.

Relief Through Debt Settlement

Debt settlement is a financial game of chicken, and usually a bad alternative to bankruptcy. We do not recommend debt settlement for the vast majority of people. Bankruptcy is almost always a better option debt settlement is a last resort for those who face overwhelming debt but cannot qualify for bankruptcy.

Debt settlement companies typically ask you to stop paying your creditors and instead put the money in an account they control. Each creditor is approached as the money accumulates in your account and you fall further and further behind on payments. Fear of getting nothing at all may motivate the creditor to accept a smaller lump-sum offer and agree not to pursue you for the rest.

Not paying your bills can result in collections calls, penalty fees and, potentially, legal action against you. Debt settlement stops none of that while you’re still negotiating. Expect at least four to six months before the settlement offers begin. Depending on how much you owe, the process could take years.

And the continued late payments further damage your credit score.

You may also face a bill for taxes on the forgiven amounts . Lawsuits can lead to wage garnishments and property liens.

You can attempt to settle a debt yourself, or you can hire a professional. The debt settlement business is riddled with bad actors, though the Consumer Financial Protection Bureau, the National Consumer Law Center and the Federal Trade Commission caution consumers in the strongest possible terms.

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What Does Filing For Personal Bankruptcy Do

People who file for personal bankruptcy get a discharge a court order that says they dont have to repay certain debts.

Bankruptcy is generally considered your last option because of its long-term negative impact on your credit. Bankruptcy information stays on your credit report for 10 years. That can make it hard to get credit, buy a home, get life insurance, or get a job. Still, bankruptcy can offer a fresh start if youre in financial trouble.

Address Your Credit Card Debt With Your Credit Card Company

Contact your credit card company. When you think you might miss a credit card payment, or you already have, contact your credit card company as soon as possible. Many will work with you to find a repayment plan that suits your current situation. Once youre late or miss a payment, youre considered delinquent. If you dont pay, the credit card company may block your ability to use your credit card and report the delinquency to the credit reporting companies. Generally, that delinquency can stay on your credit report for up to seven years. You could also face debt collection and be sued.

Find out what repayment options your credit card company offers. Credit card companies can, and often do, provide alternative repayment options. They depend on, among other factors, your income, how much you can afford to pay, and the amount you owe. They offer loss mitigation programs, sometimes called forbearance or hardship programs. Often these programs let you postpone a set number of monthly payments or pay a lower monthly payment at a reduced interest rate, until you repay the balance in full. If the credit card company determines that you cannot afford a full repayment plan within a certain timeframe, you might be able to negotiate to settle the debt for an amount lower than what you owe. This would depend upon the companys policies and your account-specific circumstances. Remember to get written confirmation of any alternative repayment option to which you agree.

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Talk To Your Creditors

Talking directly with your creditors can be intimidating, but remember, it is in their best interest to help you find a way to pay off your debts. If you are having difficulty making minimum payments on a line of credit or a credit card, it is always worth trying to talk directly to your creditors. Most credit issuers in Canada have programs that can grant you a payment break or lower your minimum payments. Make sure that you fully understand the impact of any agreements you make with your creditors.

Get Help With Debt Problems From Accc

American Consumer Credit Counseling is a nonprofit organization dedicated to providing help for people in debt. Since 1991, we have helped thousands of consumers pay down or eliminate debt and learn how to avoid debt in the future. We offer free credit counseling sessions where you can get a complete picture of your financial situation and learn about the options available to you for help with debt problems. We know that owing a lot of money is a stressful and sometimes scary situation, and were happy to provide advice and answers to your questions about debt, including questions like How do I consolidate loans? and How can I protect my credit rating?

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State And Local Recovery Fund

ARP added $350 billion to the CARES Act grant money sent to state, local, territorial and tribal governments. Much of the money has yet to be distributed as state and local governments decide best how to spend it. States have a lot of flexibility in how they use the money, and most are using it to help offset the negative effects of the pandemic, including boosting health care access, more help for small businesses, enhanced unemployment payments, increasing broadband access, supporting education and more. Some states are even providing stimulus checks to residents. Maine, for example, in its 2022 supplemental budget, included $850 stimulus checks to anyone who makes $100,000 or less a year. Most states have a COVID-19 section on their website. Check there to see what benefits your state may have or contact your local representative or local government website.

Best For Customer Satisfaction: New Era Debt Solutions

New Era Debt Solutions maintains a staff of attorneys ensuring that everything is done according to state and federal law giving consumers confidence in the job done.

• No upfront fees or monthly administration charges

• Attorneys on staff

• Free consultation with a debt specialist

• Not available in certain states and cities

New Era Debt Solutions has been in business since 1999 and has helped clients settle over $250 million in debt. Clients will not pay any upfront charges for its services. Its plans also come without any monthly administration fees, and performance-based fees are only charged when you see results.

Like other debt settlement companies, New Era Debt Solutions has its clients save money for debt settlement in a separate account. In the meantime, they negotiate with your creditors to help you pay less than what you owe.

According to the company, its clients settle their debts and become debt-free after an average of fewer than 2-3 years. They claim to be able to expunge over 50% of debt owed. The company claims to lower both the balance and interest rates of debts.

Other benefits of New Era Debt Solutions include the fact it has attorneys on staff and an account management team is also assigned to each client from the start. The company also handles all of its work in-house and never outsources tasks to other unproven firms or contractors.

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Still Stumped Here Are Some Clarifying Questions We Have Answers For

What documents do borrowers need to apply for forgiveness?

The Department of Education said the application will be short, and borrowers wont need to upload any supporting documents or use your ID to submit your application. It will be available in both English and Spanish and will be accessible by phone and computer. The form will ask for your social security number.

I heard that if Im enrolled in an income-driven repayment plan, I will automatically get loan forgiveness. Is that true?

The White House announced that 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department of Education. If you are currently on an IDR plan, you likely fall into that category. Similarly, if you completed the Free Application for Federal Student Aid, or FAFSA, this year, the Department of Education likely has your income information, so you may also get automatic forgiveness. However, it doesnt hurt to fill out the application anyway.

I got a Pell grant in undergrad but owe graduate school loans. Do I still qualify for the additional $10,000?

Yes.

I only got a partial Pell Grant or didnt qualify for Pell for the whole duration of undergrad. Do I still qualify for the additional $10,000?

Yes.

Im a parent with Parent PLUS loans, and I received Pell. How much relief do I qualify for?

$20,000.

Wait, do I have to prove I received Pell? How will the Department of Education know?