Many people rely on debt relief programs to help them manage bills or proceed with a bankruptcy filing; however, many of these programs aren’t as successful as advertised because of their structure.
Unfortunately, stringent guidelines dictate the process by which debt relief programs are told to help consumers manage bills. So while the intentions to assist consumers are good, their actions often make matters worse.
A Closer Look at Debt Relief Programs
Debt relief programs can come in the form of credit counseling, debt management plans, debt consolidation, home equity loans and Chapter 13 bankruptcy. While they are different in how they help consumers manage bills, they have the same goal: to clean up debt.
Consumers who use these services may show up voluntarily, but often are ordered to get some help. For instance, a person may want to file for Chapter 7 bankruptcy, which wipes out all debt.
However, before this can be done, the court will order the person to go to credit counseling to determine if the bills can be managed another way, such as through a payment plan. If a person files a Chapter 13 bankruptcy, they will also be court ordered to pay back all debt in monthly payments.
The Success Rate of Debt Relief Programs is Low
While debt relief programs offer consumers a way to manage bills and helps them eliminate debt in a responsible way, very often the success rate of these programs is low.
This is because the fixed monthly payment plans set up by the programs, court system or even the IRS look at debt-to-income ratios to determine repayment. Unfortunately, they don’t take into account unexpected expenses that could stand in the way of a payment. With no available flexibility, debtors often default payments. As a result, only 25 percent of debt relief programs actually survive.
Are There Alternatives?
Luckily, there is an alternative to these programs called debt settlement.
Debt settlement offers flexibility to miss payments or adjust payment amounts as needed. You simply set up a savings account then build up money to pay one debt at a time. Once that debt is paid, you start over. This offers the flexibility many need to manage bills and debts according to their life’s circumstances.
While it’s unfortunate that most debt relief programs fail, it’s good to know there are alternatives. By considering debt settlement as an option, you may be able to successfully manage bills and debt for the first time in years.