Solving Your Personal Debt Crisis

America is in the middle of a debt crisis of unprecedented proportions. Variable-rate housing and credit card loans, as well as the severe economic downturn that saw millions of jobs vanish seemingly overnight, have made this debt crisis not only a national issue but a personal one. More and more families suffering from personal debt crises are taking to heart the lessons of the national and international debt crisis; maintaining large amounts of high interest debt loads, and leveraging them only by taking on more and move individual debt. This no longer seems like an even possibly tenable life plan given the current world situation. Still, even if the times of taking on bad debts (encouraged by the nation's faulty financial practices over the past decade) are over, there is still the crippling issue of how families can resolve their credit card debt crisis without causing long-term damage to both their FICO credit scores and without also risking the loss their property: from their TV set or living-room sofa all the way up to their home and car.

Once you do reach a point in your personal finances so dire that it can really be described as a debt crisis, it's pretty tough to figure out how to get yourself out of the hole. The solution to a debt crisis should, of course, be better than the crisis itself, but unfortunately the governmental protections in place to help dig families out of insurmountable debt have also been eroded considerably during the years of financial mismanagement leading up to the national debt crisis, and few working families are now able to qualify for the Chapter 7 bankruptcy protection that would be able to liquidate those suffocating obligations.

Many services like Consumer Credit Counseling promise results in resolving a personal debt crisis, especially in the form of home equity debt consolidation, but unfortunately a good number of the organizations offering home equity consolidation loans are little more than just licensed newcomers to the field looking to cash in on the opportunities created by the broader debt crisis. Debtors should worry about any plan that involves lightening their day-to-day load by further eating into their home equity (and putting that home even more at risk). Only families who are sure they are able to pay off these home equity consolidations should consider entering into them, and this should be true only if the consolidation companies are not charging fees that capitalize on the worries created by the debt crisis in order to make more money off the debt addled families.

Some borrowers have instead looked upon debt settlement negotiation, which is a new alternative to Chapter 7 designed for borrowers who either no longer qualify for Chapter 7, or who are afraid of losing their assets during that process. In debt settlement, the companies negotiate with creditors to drastically reduce the amount for which the debtor will be held accountable with the implied possibility that the debtor would instead otherwise file for Chapter 7 bankruptcy or simply stop payment on the loan. In a time of national debt crisis, this is no empty threat because creditors are experiencing rafts of across-the-board write-offs. The costs of this negotiation may vary from company to company, as will the results; some companies may reduce the debt load--and thus your debt crisis--by up to two thirds in exchange for a promised of total payment, while others may refuse to negotiate at all. Still, a consultation on debt settlement seems well worth your time before considering other, more drastic options for debt crisis resolution.