Q: I'm considering resorting to the services of a debt consolidation agency at the moment and I?d like to know how reliable this form of debt relief is.

A: Basically, debt consolidation is a really powerful instrument of handling delinquent debts. However, statistics show that about 60% of the people using the services of debt consolidation firms end up filing for bankruptcy in as short time as 2 years since the beginning of the process. The weakest part of the debt consolidation strategy is that it doesn?t reduce the amount of money that you owe to your creditors. There?s also a number of other risks that you will run when resorting to the help of debt consolidation companies ? the largest of which is running into an unfair one that will demand a significant fee from you in advance and stop helping you as soon as you send the money to them. Unfortunately, despite all the efforts that the authorities make in attempt to close such companies, they are still losing the struggle. Guess you already know what the bankruptcy can do to your credit score ? up to 10 years of insane interest rates is not something that one would want to go through, isn?t it?

Q: I'm planning to sign in with a credit counseling company ? mostly because they promise to handle all my debts at once. Can I expect these big promises to be true?

A: This question is a pretty hard one. Yes, most credit counselors promise to do all the work for their clients at once but no, there's no guarantee that your money won't vanish as soon as you pass them over into the company's account for it to be distributed among your creditors. In most cases, a credit counseling agency will charge you a fee for its services right after you sign in with it - and only after that you will be allowed to make the first payment that will be transferred to the people and companies that you owe money to. However, there has recently been a case when an enormous sum of $2 million just disappeared from the credit counselor's account leaving the debtor to settle his problems with the raging creditors on his own. Sink or swim, dear client. Of course, the credit counseling agency that did it was closed and everything - but there wasn't too much that the court could help the debtor with. Other 'non-profit' credit counseling agencies often turn out to be funded by the creditors themselves - which means that the money you are going to transfer into the CCC's account is pretty likely to be given away to one of your creditors only, leaving the others unpaid and eager to keep on bugging you with collection calls and threats of lawsuit.

Q: Will a debt settlement program work out for me?

A: This depends mostly on how accommodating your creditors will turn out to be. Most of them have already lost some of their money due to a number of their debtors filing for bankruptcy, so they will probably agree to cancel your debt for an amount of money smaller than your outstanding debt in order to avoid losing all of it. The others, however, may not be that eager to forgive you a part of your debt. Judging by our experience we can say that large credit banks usually turn out to be more receptive to the offers stated in your settlement letters, while smaller non-credit organizations appear to be more stubborn. Another important factor is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which obliged the bankrupt debtors to pay at least some of their debts. This made the creditors? fear of their debtor's bankruptcy a little less, though it is still more likely that they will agree to settle the debt rather than run the risks of dealing with a bankrupt client.

Q: What is better: debt settlement or bankruptcy?

A: We just can't understand why so many people in trouble with debt repayment think that filing for bankruptcy is the only option that they have? The main disadvantage of bankruptcy if compared to debt settlement is that it will damage your credit history and score so bad that you won't be able to get affordable interest rate on new loans for up to 7-10 years from the moment you file for it! As opposed to it, a good debt settlement practitioner will be able to settle your debts for a tiny fraction of their outstanding amount without letting the creditors make your credit history any worse (in case you don't have late payment reports included into your history already - they may last up to 3 years from the moment they were submitted by your creditor). The second point is that debt settlement doesn't take as much time and effort as the process of filing for bankruptcy. Pretty important thing for a distressed debtor, isn't it? And the last but not the least - with that new bankruptcy law, you will most probably be forced into a Chapter 13 repayment plan instead of being allowed to file Chapter 7 bankruptcy, which means that in the following years you won't be able to spend money on anything but necessities. Doesn't sound very tempting, right?

Q: Are there any restrictions concerning the frequency I can use a debt settlement program with?

A: There are absolutely no restrictions at all - simply because the clients of debt settlement agencies do not have to appear in court or get involved into any bankruptcy filing. Thus, you can resort to the help of the debt settlement service every time the burden of your debt gets too heavy for you to carry it on - and enjoy the high life during the rest of the time!

Q: Is that true that only delinquent debts can be settled?

A: No, it's not. You may resort to the help of a debt settlement program even if you are still making your credit card payments according to the regular schedule - and this will help you to keep your credit history clean. However, your creditors will be more likely to believe that you are trying to settle your debts due to certain financial hardships if you are late on your payment schedule.

Q: Will I be obliged to settle all my debts at once - or can I choose only the ones that I want to be settled and keep on repaying the rest as usual?

A: The decision is all up to you - you can decide to negotiate with all of your creditors in attempt to settle the amount of money you own to each of them - or you can just choose to settle one debt and process with the rest according to your usual repayment schedule. The only thing you should make sure of is that your legal attorney is aware of your plans concerning the settlement of your debts.

Q: What can I do to stop the endless collection calls from my creditors?

A: You attorney may offer you to represent you legally, which will oblige your creditors to contact him/her and stop bugging you. You may even be offered to change your phone number so that all collection calls get forwarded right to your lawyer.

Q: Where can I get more information about debt settlement and related topics?

A: You can submit all your questions concerning these matters to us by using the form provided below. All requests will be answered in as short time as possible!