The low down on Debt Management and debt assistance companies

According to the Federal Reserves’ Statistics published in April 2010, total Consumer Debt in the USA stood at approximately $2.44 trillion as of February 2010. Though it sounds (and is) an astronomical figure –the good news is that the figure is 5.6% less than it was one year before. Struggling with the serious economic consequences following the financial volcano which erupted in 2008, Americans are tightening their belts and paying down their debts.

Total Consumer Debt is calculated by adding together non-revolving debts, which are basically long term debts and revolving debts, which are mosty credit card debts. About 35% of the total debt is revolving debt. From Feb 2009 – Feb 2010 the amount of revolving debt owed by U.S. consumers went down 13.1%. Statistics from the same report show that total consumer debt peaked in the 4th quarter of 2008 at $2.6 trillion and has been gradually decreasing since.

Despite the recession, the loss of jobs, the foreclosures, the losses of equity in property and the tighter restrictions on credit lending, Americans are finding ways to pay back their debts. Given the realities, how is this happening?

Well to begin with, it started when the credit card companies closed ranks and pulled in the reins on the all-too-easy-to-obtain credit which helped fuel the housing and economic bubble in the first place. This change of policy led to a reduction in existing credit lines for millions and at the same time restricted any chance of obtaining new credit lines except for the super credit worthy. As the card companies tried to cover their backs against losses on outstanding credit by unilaterally adjusting rates, terms and conditions, the government intervened to regulate what they could and could not be do. The Credit Card Accountability Responsibility & Disclosure Act of late 2009 affords new protections to consumers against unfair practices by credit card companies.

In early 2008, the spending party stopped; lending institutions realized they had put themselves at too much risk. Until then easy credit was given because it was thought to be  ‘backed up’ by constant rises in housing which translated into more home equity, against which a borrower could ‘safely’ borrow. Of course, when housing took a dive everything else plummeted with it and the overall extent of the risks became all too evident.

Since lenders themselves began to tighten the screws and cut off new credit, millions of Americans have been forced to confront a new reality. Faced with mountains of debt when many of them were losing their jobs, and unable to continue paying mortgages when high adjustable rates kicked in, they have been watching the equity in their homes diminish monthly as prices crashed or been forced into foreclosure.

Americans have had to look for new ways to manage their finances. Some have been able to take the necessary measures to keep their heads above water. They have been able to review their situation alone, understand what led them to it and understand how to rectify it. More importantly they have accepted the need for personal sacrifice, determination and initiative. Acting on their own they have been able to manage their debts and begin to pay down their debts to sustainable levels by cutting their own monthly expenditures and/or looking for ways to increase income by taking a second job.

As the number of Americans with Debt Problems grew, the number of companies offering professional assistance has expanded quickly –a vacuum in the market is always filled! Debt Management companies, Debt Consolidation companies, credit repair organizations and credit counseling companies have sprung into existence to supply answers to the demand for help.

So many people were (and still are) mired in such heavy debts that managing them alone is beyond their abilities. Faced with this situation they have looked for help from professional advisors.

Professional companies offering Debt Management Services etc. have existed for long time, and those who have worked in the field for years have generally established good reputations. They provide legitimate services helping their clients better manage their debts, or reduce, restructure or Consolidate their debts. Unfortunately some of the new companies, who jumped on the recent bandwagon, have been less than scrupulous in their dealings. The predatory ones advertise miraculous solutions promising to get their clients ‘Debt Free -instantly.’ We all know miracles rarely happen and their clients most often find themselves out of pocket for ‘services which are not rendered.’

While there’s a real need for educating consumers on how to prevent debt troubles, there is also a need for authentic debt counseling to help them get out of trouble. The problem at the moment is that there is little oversight of the companies who advertise these services.

Helpful information to consumers considering the services of these types of company can be found in publications like the one found at:

http://www.irs.gov/pub/irs-tege/eotopica04.pdf which defines what services credit counseling agencies and credit repair organization may provide, and stipulates the rights of their clients.

If you’re looking to avail yourself of a professional company to solve your Debt Problems, the most important thing to do – is thorough research. You want to ensure that the company you turn to for help, will actually help you with your debt problems and not worsen your situation. Read as much as can online about the subject and make sure you don’t fall into any traps because you don’t understand the terminology and know what the real options are. The more information you have, the better equipped you are to make confident and competent decisions. The better you prepare for your first meeting with a professional advisor, the more you’ll know which questions to ask. Remember the saying; “if it’s too good to be true, it probably is.” One source for objective information is http://www.financlopedia.com which gives factual, unbiased information about credit, debt, loans and bankruptcy problems and other aspect of finance.

Despite the bad publicity generated by the dealings of unscrupulous companies, people who are unable to deal independently with their debt problems, can save money through the legitimate companies. With the right circumstances, the right attitude and the right counseling it is possible to alleviate some of your debts and stave off bankruptcy.

About the Author

written by John Harbinger Jr.

Brian & Heather’s Debt Free Call

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