Debt Relief: Research Reports

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Credit Management

For those who need assitance managing their credit there are a variety of choices and options out there. In an article by Hispanic magazine, financial author Julie Stav explains what a FICO score is, how credit bureaus calculate it, and steps on ways to improve your score. An article by U.S. News and World Report states the following steps to keep this score manageable:

1.) Pay bills on time.

2.) Pay down debt.

3.) Maintain long-term credit relationships.

4.) Do not apply for too many loans.

A great self-help guide to consider is Repair Your Own Credit which instructs debtors how to repair their credit and how to reestablish credit. It also lists organizations that will either give people free assistance or charge a very low cost to help someone stay out of debt. In NEA Today, they also refer to some credit management agencies such as Equifax as well as warn people about credit repair clinic rip-offs saying they do not do anything that you cannot do yourself. The counselors at Credit Union Magazine suggest that bankruptcy be the last resort in certain circumstances.

Debt Consolidation

When the topic of debt management and relief comes up, consolidation is usually one of the words that follows. Many experts agree that debt consolidation is a good idea when it seems a person is getting too deep in debt. Three things to consider before deciding on debt consolidation:

  1. Evaluate where you stand with your debts.
  2. Don't wait until you are in over your head.
  3. Be sure to understand how debt consolidation truly works.(Morris, 103)

Numerous experts also agree that a nonprofit company is the best way to go for premium terms. Also, no matter if they are for-profit or nonprofit, one should gain as much information as possible about the company before dealing with them. Futhermore, ensuring the institution you choose works with your creditors. Checking their status with the Better Business Bureau is a great idea. (Brown, 326)However, there are many different opinions on how to go about this. One common opinion is that only school loans should be consolidated, and this is only because of the enormous necessity of a college education. (Orman, 149)

Collection Agencies

A collection agency is a company that is contacted by the original lender to collect past due and defaulted accounts. (

The Federal Trade Commission states that if you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a debtor. If you fall behind in repaying your creditors, you will probably be contacted by a collection agency or a "delinquent debt collector".

Mike Ryan, President of NACM Southeast, wrote an article on "Qualifying Your Collection Agency". You, as an owner in a business have to be careful of what collection agency you choose. You have to ask yourself these questions: What does the agency know about your business? Can you rely on them to handle your accounts honestly, ethically, and effectively? Does the agency understand you may do business with this client again in the future? (Ryan, Mike. 106.8) This is the kind of agency that can legimately collect your money.

The FTC also gives a few tips on a fair debt collection. There is an act that requires that debt collectors treat you fairly and prohibits certain methods of debt collection. This is known as the Fair Debt Collection Practices Act. This does not mean that your debt will just go away. You still have to face this debt head on. This just protects your rights.

You can avoid these agencies all together by simply managing your money right. Self-Help may be the Best Help.

Bankruptcy Summary

Bankruptcy is considered to be a "major bomb" in the world of credit. It should be the last resort in most cases for debt relief. Depending on the situation it is sometimes unavoidable.

When selecting a bankruptcy attorney, research his/her background for work experience in this sensitive field of debt relief. There are two types of personal bankruptcies, Chapter thirteen and seven. Corporate bankruptcy is called Chapter eleven and can only be filed by businesses.(Leonard, Attorney Robin "Bankruptcy". Berkley: Nolo Press, 1998).

Credit laws vary from state to state for filing and so does liquidation of assets over a period of time.

Initially, the person filing will get a sigh of relief from being overwhelmed. Later, credit agencies and other lenders will analyze his/her credit information with a fine tooth comb for at least "ten" years or longer. This a combination of an advantage but a disadvantage to debt relief.

Lenders almost immediately view a person as a high - risk for credit due to having bad debt written off through bankruptcies.

Chapter thirteen can be filed in a court with a trustee assigned and is considered a "reorganization" over a period of time to repay debt. The court trustee decides the total amount to be paid back and the time allotted for payment. The person's salary or income determines what will be allowed for the cost of living and the amount that will be disbursed to the creditors. No new debts can be accumulated without the court's permission (i.e., credit cards, loans). Upon closing, obligations are fulfilled and the person can begin on a new credit journey, but the on this new path the person needs to be aware the discharge will remain on the credit report for the next five to seven years.

Chapter seven can be filed in a court and the person will walk away from most of the debt secured and unsecured. The person's salary is freed from the threat of garnishments and being sued by the creditors. The information stays on the credit report for the next ten years and creditors will be view the person as a higher - risk than if the person had filed a Chapter thirteen.

When a person has filed for either bankruptcy it becomes public record information that can be viewed by anyone with acccess to public records documents.

Again, bankruptcy needs to be considered as the very last option to debt relief.

Debt Management

Credit counseling and debt management agencies give professional help to individuals who need assistance paying off debts. These agencies look at the client's debts, listen to needs, make recommendations and create budgets. These companies have received bad press in the past, do research before selecting one. Make sure it is accredited with an institution, such as the Better Business Bureau. A debtor must also make sure to look at state laws, so that he/she is not overcharged for financial help.

The steps most of these agencies take to help debtors eliminate debt are:

1.) They help debtors to assess his/her debt situation.

2.) Avoiding overspending and handling existing debts are other areas that consultants help debtors with.

3.) The final steps are helping the client to build and maintain good credit.

Most financial advisors agree that the most important step a person must take before seeking counsel is to change his/her money management skills. The debtor must change the way he thinks. M