There are a few options available for those struggling to make debt payments on time. One is to work directly with your creditors to find some kind of agreement to reduce your debt or negotiate lower temporary payments with a future lump sum. Another is to work through a debt consolidation, settlement, or resolution provider and pay them to work with your creditors on your behalf. You can also choose a route through the U.S. legal system and file for bankruptcy. For anyone straining to repay debts, one of these choices may be better suited than others, depending on their circumstances. At Behm Law Group, Ltd., we never recommend working with a debt relief program. Not only are these programs limited in the type of debt relief they can provide in Windom, MN, but they’re also extremely costly and highly detrimental to credit scores. While bankruptcy also has its costs and can impact your credit, it’s almost always a better option for those with multiple types of debts they can’t repay.
Debt relief programs like the U.S.’s largest, Freedom Debt Relief®, may seem like an easier path than going through the process of filing for bankruptcy. In reality, however, these programs tend to prey upon debtors who are unfamiliar with all their options or have outdated perceptions of the social implications of bankruptcy.
While debt relief programs might look good on the surface, and they certainly make an effort to advertise the “benefits” of choosing debt settlement, consolidation, or resolution with their services, potential customers of any relief program should make every effort to read the fine print before choosing.
Fine Print of Debt Relief Programs
- Debt relief programs are expensive. Program fees range from around 15% to 35% of the debt that’s being negotiated. That may not seem too large of a fee, but it’s taken out of every debt handled. If you have, for example, the debts that Freedom Debt Relief says is the average they handle ($25,000 across multiple credit lines), you will pay them between $3,750 and $8,750. With those same unsecured debts, you would have a Chapter 7 bankruptcy court filing fee of around $338.00, and a flat rate attorney fee of between $1,000 and $1,750.
- Debt relief programs take a long time. Freedom Debt Relief says they handle cases in a two- to four- YEAR-LONG time frame. Chapter 7 bankruptcy takes as little as three to four months. Additionally, debt relief programs typically extend the period you will spend repaying the debts they negotiate up to five years and even longer.
- Debt relief programs only handle specific debts. Generally speaking, debt relief program customers only have their credit card and medical bill debts negotiated. In contrast, bankruptcy handles those debts in addition to mortgages, car loans, tax debts, debts related to any other properties, and many others.
When you consider these facts, it’s clear that filing for bankruptcy is a less expensive, faster, and much more effective option. More importantly, with regard to your credit record, bankruptcy has a much more positive overall impact that debt relief programs. With bankruptcy, your credit rating will fall but there will be a floor from which it will start to rehabilitate immediately after your case is filed. With so-called “debt relief programs”, your credit rating will be negatively impacted every month for several years and there will be no chance for the rehabilitative process to start.
To learn more about why it makes sense to use bankruptcy for debt relief in Windom, MN and the surrounding areas, contact Behm Law Group, Ltd. today at (507) 387-7200 or stephen@mankatobankruptcy.com.
