The tidal wave of consumer debt accumulating from unchecked personal credit card debt threatens to overwhelm our nation even as the lenders themselves reap the benefits. Americans have grown addicted to spending without care for their own income and budgets are something our grandparents used to employ. As a nation, we have almost lost track of the notion of saving for the future – aside, of course, from the exceedingly wealthy who no longer bother with banks within the United States – and our economy suffers as a result. More to the point, our citizens suffer as well from the drop in property values and rise in unemployment that are direct results of the consumer debt explosion. Credit card bills are killing this country, and it is past time that we do something about it.
It is more than understandable how this all happened. Just turn on the television: every other commercial advertises either the untold benefits from plastic purchasing (The sheen! The class climbing! The convenience!) or the consumer credit counseling surgical practicalities (The desperation! The condescension! The oh so marketable convenience!). Somehow, along the way, the average American household managed to rack up around eight thousand dollars in unsecured debt almost wholly from credit card usage. The past decade, as home appraisals skyrocketed and well paying jobs could be plucked from the vine, there was not much reason to worry. This was the American millennium, after all, and things would never change.
Somehow, an unprecedented period of economic expansion came to an end, and the real estate bubble finally burst. And, more to the point, a good number of borrowers found that they were having trouble making even the minimum payments upon their various credit cards. Who knew? The tyranny of unsecured debt has at last seeped into the household accounts of most of our citizenry and the effects are everywhere. Beyond the new budgeting, though, and the tightening of belts, families need to take a close and educated look at their credit card problems and see what can be done. There are a number of debt managements solutions that have arisen in the past few years purely to deal with such situations although the simplest debt relief is the most annoying: a halt to purchases. Serious attention paid to expenses and savings accounts are the foundation of any lasting credit card debt relief.
Above all else, families must stop spending without regard to the future. Heads of household should collect all credit cards and, while not necessarily setting them aflame, at least keep them tightly locked away from the grasp of misguided purchases. One of the greatest problems facing consumers is this culture of commercialism. Credit cards really are an addiction, and otherwise ordinary people will find themselves driven to buy something they do not really want simply because they are depressed or worried. This is precisely the sort of action that the credit card companies are counting upon. This is the reason that the credit card companies offer new accounts at rock bottom rates to borrowers just exiting Chapter 7 debt elimination bankruptcy even if the borrowers successfully washed away debts owed to the same credit card companies. They figure the borrowers will be all too likely to resume past spending habits – this time, without hope of bankruptcy protection for near a decade – and, more’s the pity, the credit card companies tend to be correct.
Obviously (as you would hope, actually) credit card debts are dealt with according to their debtors’ credit ratings. The Fair Isaacs Corporation devised the FICO credit scoring system more than fifty years ago expressly to guide lending institutions toward equitable treatment of borrowers regardless of rage, gender, income, or, really, anything beyond the borrowers’ history of payment and capacity of credit. To this day, the exact equations remain a mystery – and they grow more complex by the moment – but the overall methods remain a sorta miraculous triumph of democratic capitalism. No matter their earnings, consumers that maintain excellent FICO ratings will always be able to garner credit balances well above what they should ordinarily deserve.
Unfortunately, that availability of credit card debt leads untutored applicants toward significant debts they have no hope of soon paying off. At this point, debt management solutions are necessary. They come in a few different flavors, but all of them contain severe disadvantages. The ideal debt management solution is – yeah, that’s right, we know – to never get yourself in debt. Careful budgeting, spending only when needed, cutting out wasteful expenses, and all proper household financial techniques will do more to prevent credit card debt from overtaking consumers’ lives than a string of limos carrying debt professionals. Alas, since you are already reading this article, we are going to presume it is too late to apply preventive measures, but there are still steps available to successfully deal with the credit card debt problems as they stand.
As your credit card companies will explain (along with many, many other credit card companies that you have never heard of), the easiest solution would be to just transfer all existing credit card debts onto a single account. Presuming your credit rating has not dipped to fraudulent levels, virtually every credit card company should be eager to take on your existing debts for initial rates nudging zero percent. At the same time, every representative of every credit card will urge such a change in debt and mollify the borrower by insisting they will pay off the balances well before the adjustable interest rates would rise.
Of course, the very reason most borrowers are in this state is precisely because they cannot guarantee they could repay their debts and the last thing such debtors need is more capacity to spend. Remember, not only are the borrowers consolidating their credit card debts upon a single card risking the interest rates rising to over twenty percent should they fail to repay their obligations within a specific time, but they are also allowing themselves more space for foolish purchases upon the cards that remain. It is not a double edged sword; it is a ticking time bomb. The number of credit card victims genuinely served by credit card consolidation within credit cards could be counted… well, it would resemble that initial rate offered.
For some borrowers, debt consolidation loans that are not themselves tied to credit cards may make a bit of sense. Unfortunately, in order to get any sort of decent interest rate, these sort of loans tend to be secured. Low interest unsecured credit accounts do exist, but, alas, they tend to only be offered to those without credit or income issues and tend to be only above six figures. Secured debts are almost always available, witness the current sub prime mortgage lending crisis, but most debtors haven’t much significant collateral to offer beyond their own primary residence. In other words, debt consolidation loans may as well be considered home equity loans, and this creates a whole new sort of problems.
Whether you first think of a consolidation loan walking through your bank and noticing the ever present advertisements or listening to the sweet sounding pitch of a telephone salesman, there is no worse way to rid yourself of credit card debts. To be sure, the rates will be lower – they would have to be – and the payments, stretched to ten or thirty or however many years, will surely be much lower. At the same point, though, the eventual money paid for that original debt will be exponentially higher considering the wonders of compound interest, and, as with debt consolidation through other credit cards, this still leaves open other credit accounts without penalty or reason to curtail destructive spending habits.
There is, as every borrower knows, one worse option when eliminating credit card debts. Despite the legislative carnage wrought the past few years, Chapter 7 bankruptcy protection does still exist as a palliative, but anyone who has seen friends or family suffer the effects knows just how little Chapter 7 bankruptcies could not consider this actual protection to any borrower’s life. Above all else, the 2005 congressional alteration of the United States bankruptcy code effectively forced anyone thinking about declaring bankruptcy to surrender all assets (even cherished items handed down through generations) to threat of seizure by government authorities for court auction so as to repay the original lenders for a trifle of their actual worth. Nowadays, the court trustee must consider the filer’s assets as according to replacement value rather than, as formerly, the resale value. To fully imagine the distinction, look around your living room and imagine the worth of the items when sold at estate sale compared to the cost should they be purchased at mall stores absent haggling. The Internal Revenue Service was heavily involved in the passage of this legislation, if that needs to be said.
One can always talk directly to representatives of the credit card companies and plead for forgiveness. In the case of sincere and demonstrable (and, most importantly, tragic) mishaps, they will sometimes shrug away partial debts so as to avoid the bad publicity, but one shouldn’t expect forgiveness from lenders. There are also several state and federal government programs, dizzying in their numbers, that apply to various borrower predicaments, but, at the same time, one should never expect consumer debts to explicitly fit into statutory regimens. It is not exactly a hard life for this generation of borrowers. Even thirty years ago, this sort of credit availability and (relative) unaccountability would have been beyond imagining.
Still, there is a financial burden and the lenders will eventually demand payment. Should the payments be of sufficient worth, the lenders will have no choice but to start legal proceedings to attempt to recoup their losses. However, it is important remember that such action are extremely expensive and the absolute last resort of multinational corporations. More than anything else, these sort of businesses are terrified that their debtors will simply disappear or (hard as it is under current circumstances) declare Chapter 7 bankruptcy. It’s virtually impossible to declare bankruptcy these days, but company guidelines are famously slow to notice the evolution of consumer practices and still worry over the dissolution over promised obligations.
In the wake of our sudden credit card debt crisis and the limited powers bankruptcy protection now holds (and, more to the point, the limited understanding of such among credit card companies), other financial services have come into their own which play with that slight threat yet existing. As long as Chapter 7 bankruptcy still has the potential to eliminate credit card debts, borrowers still have one ace in the hole when arguing cases with their lenders, and a new business has developed to enable the singular advantage consumers retain. Debt settlement isn’t so terribly different from Consumer Credit Counseling. The debt settlement professionals have essentially the same approach when dealing with credit card debts, but, unlike the CCC hordes, they actually work on behalf of the debtors.
The ugly little truth about Consumer Credit Counseling companies is their dependence upon credit card companies. There’s a reason they have the advertising budget to blanket late night television with ever more desperate commercials, after all. The CCC industry will – at pains – lower interest rates for their favored customers as well as waive past due fees and over limit charges that never should have been assessed in the first place, but they won’t ever even try to lower actual debt balances. Consumer Credit Counseling isn’t much of a lie, really. They do counsel consumers about credit. It’s just rarely counsel that the consumers should follow.
Certified debt settlement specialists, on the other hand, work solely for their debtor clients. Moreover, they place the burden for financial burdens squarely upon the lenders. This isn’t the same thing as borrowing the price of a carton of milk from the nearby store, after all. These are massive conglomerates whose profits depend upon not only convincing naïve borrowers that they can buy whatever they want without consequence but also allowing them the credit to do so. The borrowers, admittedly, are not without fault, but the lenders themselves have institutional malfeasance that must still be addressed. Fortunately, for the moment, anyways, this is where debt settlement comes into play.
Debt settlement companies negotiate on the part of the borrowers in attempts to lower the overall balance originally owed. Seems too much to ask, but credit card companies regularly let loose more than half of their promised funds in exchange for a payment schedule vouchsafed by a respectable debt settlement firm. Credit cards, by their nature, as with anything that could charge twenty percent annual percentage rates, assume a certain risk that is backed up by the guarantee of tax write offs for delinquent borrowers. Otherwise, they would never lend so much to so many with so few resources. These credit card companies are conglomerates betting on fractional chances of profit one way or another. All traditional notions of ethics and morality should seem as irrational and disparate as that of someone going to war for a Klondike Bar. Credit card settlement really is a different sort of system, and owing has nothing to do with it.
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