Consumer Debt Reduction Methods

There are many common consumer questions concerning reducing secured and unsecured debt.  Following here are just a few of those questions with a brief response:

1. When should I stop using my credit cards?

Stop using your cards when you are unable to make a reasonably substantial payment on the principal debt.  Do not continue to run up the balance on the card while covering only the minimum monthly amount due.  If you can no longer make the minimum payment due it is time to obtain debt reduction assistance from a debt reduction agency or attorney in order to put a debt reduction plan into effect to stop the problem from getting worse.    

2. When should I refinance my home to with a debt consolidation loan to pay off my credit cards?

The answer can be summed up in one word, never.  It is never going to be a reasonable solution to pay off unsecured debt by burdening a secured debt to provide funds needed to pay down an unsecured debt.  The worst credit card companies and similar unsecured creditors can do to you is harm your credit rating and refuse to give you additional services or credit.  In sharp contrast, a failure to pay the monthly principal on a mortgage note can result in a foreclosure and sale of the home leaving the debtor homeless.  A better plan would be to engage in debt reduction management and obtaining the debt reduction assistance of an attorney or a debt reduction agency before agreeing to any debt reduction plan involving secured loan consolidation.

3. What should I do if I am being harassed by debt collectors calling my home at all hours of the day and night?

Pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c § 805c, a debt collector must cease all communications with a debtor who has informed the creditor in writing that the debt is disputed, that the debtor refuses to pay it and the alleged debtor wants the creditor to cease any and all communication with him to collect on the disputed debt.  A creditor violating this written debtor request is violating federal law at his own risk.

4. I want to reduce and settle my debts through a law firm.  Do I have to meet with an attorney or appear in court?

Yes, you would need to initially meet with an attorney to discuss debt reduction solution that would meet your financial situation and debt reduction goals and repayment abilities.  The attorney would be able to represent your interests and rights with your creditors, often through debt reduction negotiation with creditors to ultimately construct a debt reduction management plan.  He could also appear in court on your behalf should that be necessary.

5. Will a debt process affect my ability to purchase a home or refinance my existing mortgage agreement?

Yes, the bank or mortgage lender will likely become aware of your inability to pay on your unsecured debt obligations and as a result will likely turn down your application for mortgage financing or mortgage refinancing.

6. Why would I want to consolidate my credit card debt from multiple cards?

It may be advisable to opt for a debt reduction solution that would consolidate credit card debt into one loan for two reasons, (1) convenience of paying only one bill each month and (2) to gain the reduced rate of interest offered by the single loan to be applied uniformly to all of the pre-existing credit card debt.

7. Can all of my consumer debts be negotiated and settled?

No, secured debts such as mortgages and student loans are not negotiable.  Only unsecured debt such as medical bills, credit card debt and similar unsecured debts can be included in a debt reduction negotiation with creditors affording a debtor settlement for an amount less than the original balance. 

8. What is the difference between consolidating my debt and settling my debt?

A settled debt account is closed with an agreed balance reported as paid in full under a settlement.   A consolidated debt is an account balance that has been included with other balances into a larger loan containing the total of the multiple paid account balances.  The final consolidated loan account remains open and must be paid down in full.

9. I am being harassed by debt collectors.  Is there any way to stop them?

Yes, Pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c § 806, debt collectors are acting in violation of federal law if they threaten you, abuse you or harass you during their efforts to collect a debt you owe.

10. A debt collector told me he was a police officer looking for my son but he really just wanted to find my son to repossess his car.  I was frightened and called the police.  Should the police have stopped him?

Yes, Pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692c § 807, debt collectors are acting in violation of federal if they intentionally use deception or make false representations during the process of attempting to collect on a debt. 

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