My name is Steve Bis and I’ve been helping consumers that are in arrears with their unsecured credit card debts for a while now and understand the effects it has on people’s lives. When you have credit card debt and believe that the situation is no longer something you can control, you would be smart to make a decision and make it as soon as possible. You should not wait until it is too late. As the majority of you must already know is that the collectors are not polite when you contact them with issues with your bill. It’s pretty fascinating the way it works because when you first obtain the card they are very polite people when you call. Then if you contact them to dispute a past due or over limit penalty fee and attempt to have it removed enough trying to keep up with 8% or even the 7.9 % interest that they are charging on your accounts. How are you suppose to come up with the money for the elevated payments now? It was bad enough to manage before the interest skyrocketed. This is the reason Americans are searching for other options such as debt settlement vs. credit counseling, or bankruptcy. If you are not familiar with any of your options then I will offer you a little bit of an education on them.

Consumer Bankruptcy

Before 2005 bankruptcy was to be used for debtors who were going through serious financial troubles. Unfortunately it was misused by tens of thousands of Americans who were trying to evade paying their credit card debts. They didn’t want to take responsibility for their actions. The credit card companies were fed up with this so they petitioned to have the legislation updated. It is now referred to as the Bankruptcy Abuse Prevention and Consumer Protection act of 2005. This would make it more difficult for the majority of consumers to file for help. Bankruptcy should only be exercised as your very last choice after you have tried every conceivable method. Also you should think of the negative aftereffects that might come back later down the road. You would have to find a lawyer, go to court and that could run you a substantial amount of money. There is also the problem of it being on your FICO history for a long time. When you filling out any important application or document you will always have to say yes when asked the question about bankruptcy, so this does have a extremely long lasting effect on your credit.

Consumer Credit Counseling

Everywhere you turn, either it is advertised on the radio or television, you will hear about credit counseling. A credit counseling company will attempt to get the credit card companies to lower the interest on your credit cards. You then make one monthly payment to the credit counseling company and they then pay each one of your creditors for you. The drawback to this choice is even though they lower your interest rate on your credit card accounts you could still pay back as much as 125% of what you actually owe.

This is because on this kind of program you will still be paying back what the full original balance was plus some of the interest for around 4 to 7 years. Almost 50% of the debtors that are in these programs don’t graduate from the program for one reason or another. Another downfall to credit counseling is that if you have a cash flow problem and are cannot make your monthly payment they will boot you off of the program straight away. They will also raise your interest back up and the creditor could keep you off the program for at least one year and on some occasions even longer. This will put you right back to where you began, if not in a worse situation.

Debt Negotiation (also known as debt settlement)

This is the debt relief method which can save you the greatest amount of money. A reputable debt settlement company will save you at least 40% of what you actually owe. The 40% should include all the fees as well. The same with credit counseling, you will hear a lot of TV and radio advertisements quite often. These organizations are starting up all over America. Some of these companies try to make it appear like they have a magic button and are going to make all your debt vanish overnight.

There are also many companies that try to use religion to aquire the trust of people. Whatever company you are going to use it is your responsibility to due diligence on them. You can always begin with the BBB (Better Business bureau). You might be able to uncover quite a bit about a company from them. If you see that a company has only been in operating for a short time and has a slew of complaints towards them, then you must avoid them. One more thing to look for is how long has the company been around. Some organizations only make it one or two years before they get shut down or get caught ripping people off. Then some of them only stick around to make as much as possible and close down just to open up a few miles awayevening.

Steve Bis is a debt analyst and research assistant with the US Consumer Advocate, which primarily practices in credit card debt relief.

- Steve Bis