Norman - We got out of debt using Dave Ramsey's program; You'll find him at www.daveramsey.com
He has a radio show you can listen to: 3 hours daily, and a 13 week class about the nuts and bolts of how money works. FPU, Financial Peace University. You can probably find a class near you, using his website. To summarize: There is a series of 6 baby steps: 1) Get some money in the bank to pay for emergencies 2) Use the debt snowball to pay off all debts, except your mortgage. List debts, smallest to largest, and pay off with focus and intensity, starting with smallest, and rolling over payment to next one, etc. etc. thus, creating a "snowball" Also, he has written books, too. Depending on what media you like best.
Most people that I hear call in "debt free" do so in about 2 years, or less. It took my wife & I a little longer, because we fought all the way through the program! Now, we have no payments, save for our mortgage. Despite the financial chaos in the world around us, it feels good to know that we're no longer in the category of debt-ridden households. Give Dave a try, and see if you like his stuff.
I have been told that the Debt Consolidation companies are not the best way to go. For one thing, getting involved with them is a bad hit on the credit report, and you also end up paying an extra premium for their service. Also you're giving over complete control of the solution to the problem to someone who really may not have your best interests in mind. To me they feel a bit like those paycheck lending outfits. The best way, if you can, is to educate yourself about how to do it, which is basically what the "daveramsey" method seems to be, for example. It's tough work, but better done by you in the end.
I don't know anything about those services. my only contribution here would be to advise you not to worry about your credit report/score going forward. that only matters if you believe in the banking system and want to depend on it for future loans. in the depression we're moving into, the dominant priority is to get yourself out of as much debt as possible while you still can. keep your eye on that goal. don't worry about your credit score. the whole premise of credit scores and our BS way of banking is going out the window.
good luck Norman. I hope it goes well for you.
Something that the service companies may not tell you is that any debt that is forgiven is counted as taxable income if you were not insolvent at the time the balance was forgiven. My wife and I were in a situation of having way too much debt at the beginning of last year. We looked at several options, starting with the Credit Counseling Services. The programs that they offered would have had a higher monthly payment than the card payments. We then looked at several different "settlement" companies. We kept finding snags, mostly in the form of the monthly payment being more than we could afford. We looked at bankruptcy as well, but that did not really fit our situation. We finally ended up just dealing with the companies ourselves. It took a while (6-8 months), and our credit score did take a hit, but we did manage to settle on 3 accounts. We do still have several loans open, but our monthly payments are now manageable. It took persistence, but it has paid off for us. I found out about the forgiven amounts being taxable during the process, and wondered how we would manage the tax hit until I called a tax prep company to get a quote on having our taxes done. When I mentioned the debt that had been forgiven, they told me to bring in a list of assets and liabilities on each date of forgiveness. This resulted in a large reduction in our tax liability due to our being insolvent.
This path is not for everyone, and if you can handle an expedited repayment, such as the "snowball" method, in my opinion, it is the better thing to do. If you are not in a position to do that, like us, then I would recommend trying to handle it yourself. You will end up paying less, I believe, since you are not paying for the "services" of someone else. You will have to deal with incessant phone calls, though, and nasty letters. They do everything that they can to try and intimidate you into paying.
Bottom line - you have to decide what you are most comfortable with. Look at all of your options, and pick the one that works for you. As Chris says, "trust yourself."
All the best,
+1 to Strabes.
This is exactly what happens when 100% of our meduim of exchange comes into exsistance as an interest bearing loan. If you really want to get out of catastrophic debt then i suggest you purchase the book Modern Money Secrets (and the way out of catastrophic debt).
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