Slide to Financial Ruin
Debt Resolution Options Based on Increasing Debt Amounts
The amount of your debt will largely indicate your best debt relief option. Choosing the wrong option could cost you thousands of dollars and years of unnecessary stress. When the amount of your debt –and your ability to pay– go in the wrong direction, your opportunities for relief change too.
The “Slide to Financial Ruin” demonstrates typical solutions based on different financial situations. The graphic below shows the different debt relief options at various points on the slide to indicate where in the progression people typically seek each choice.
- “Move your mouse down the Slide to Financial Ruin over the hot spots. As you progress down the slide, you’ll be introduced to more severe debt relief measures.”
- SLIDE TO FINANCIAL RUIN:
- Pay Off Balances in Full:
The best and least expensive option, if you can afford it. - Pay Minimum Payments:
Typically, this option is only beneficial for a short period of time. You will end up paying $1,000s in interest unless the principal balance is significantly reduced.
click your mouse to learn more - Refinance or Consolidation Loan:
If you own a home and have equity and proper ratios, then you may be able to use that equity to obtain a loan for paying off high interest unsecured debt.
click your mouse to learn more - Credit Counseling & Debt Management Plan (DMP):
Credit counseling companies take your monthly payments and distribute funds to creditors at a reduced interest rate. You will repay 100% of your debt & interest (typically at 10%), assuming you can afford to keep up with the payments.
click your mouse to learn more - Debt Negotiation & Settlement
See description below.
click your mouse to learn more - Bankruptcy:
Chapter 7 “Liquidates” your nonexempt assets (if any) & distributes your money to creditors. Chapter 13 “reorganizes” your debt (like a DMP) to repay your creditors in 3 to 5 years.
click your mouse to learn more - Avoidance:
If you ignore your debt and pay nothing, you will continue to depend on credit for basic living expenses. By choosing this option you are committing to a life of debt.
click your mouse to learn more
Debt Negotiation and Settlement:
Debt settlement occupies an important niche because many people cannot afford the monthly payments of a debt management plan (DMP). Because these payment amounts are determined by creditors, many people are forced into dropping out of the plans and filing for bankruptcy. However, bankruptcy filings are not always successful. Some consumers do not qualify and many cannot afford the upfront fees.
Keep in mind that debt settlement companies accept clients with unsecured debts ranging from $10,000 to $1,000,000. Debt settlement is often a debt resolution option for high debt consumers who want to avoid bankruptcy.
More Debt Settlement Facts — Who Benefits and Why:
The average debt settlement consumer enrolls approximately $30,000 in unsecured debt, which is owed to about six different creditors. People who cannot afford the $600 to $900 minimum monthly creditor payments, yet want to avoid bankruptcy, will commit to accumulating lesser funds (average of $495) over a few years to offer creditors lump settlements.
Creditors prefer negotiating a lump sum settlement over receiving nothing if you file bankruptcy. The debt settlement company will negotiate with creditors and, in turn, creditors compete against one another to get paid first. Each creditor is asked to offer the greatest settlement savings for the client and once the creditor is paid, funds must again accrue before negotiating with the next creditor. Settlements typically range between 25% and 65% of the original outstanding balance (including interest, penalty fees) with most companies averaging below 50%.
The information above is based on an interpretation of statistics, facts and opinions regarding the debt resolution industry and has not been independently verified. It is provided as a good faith professional estimate of the relative costs involved with different debt resolution options. The above is not intended to be entirely comprehensive or complete and shall not, under any circumstances, be construed as a guaranty, warranty or promise of results by Debt Shield, Inc.
