Financial Advisors: Overwhelmed by debt? Know your options

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(ARA) - If you find yourself in a financial hole you can't get out of, it's important to know you have options. Being in debt can cause people to continue to make payments that they can't afford or can barely afford without much hope of ever eliminating the debt. If you find yourself in this position, there are a few routes you can pursue to free yourself from overwhelming debt.

First, getting out of debt on your own should always be your first choice, if you can do it. The quickest way to save money and keep your credit intact is to pay off your balances as quickly as you are able.

If you don't think that option is open to you, it might be time to seek outside help. The Federal Trade Commission recommends looking at the following options and finding what might work for you. When you examine each of these possibilities, make sure the organization you are working with is legitimate. Always beware of hidden costs and make sure you know exactly what you will receive before you pay for these services.

* Credit counseling: If you don't think you can get your debt under control by yourself, credit counselors can help you develop a plan to get out of debt.

* Debt management plan: Often offered through a credit counseling service, this allows the participant to make monthly deposits to the service, which in turn will pay your bills as worked out with your creditors. You will be required to make your monthly payments on time and you may be barred from applying for additional credit while on the plan.

* Bankruptcy: This is usually considered the last resort, but it can allow you to have some of your debts forgiven completely. You may also be required to put your car, house or other assets toward repaying your debt. Bankruptcy stays on your credit report for 10 years and can make it difficult to secure any type of credit during that time.

* Debt settlement programs: Often considered an alternative to bankruptcy, debt settlement, or debt negotiation programs, allow those with unsecured debt (debt not tied to an asset, like credit card debt or medical bills) to pay less than what they owe through negotiating with creditors.

"The goal of a debt negotiator is to obtain a debt settlement for you on the current debt amount you owe your creditor. For example you may owe one particular creditor $10,000, so the goal of the negotiator would be to have you end up paying back say $5,000," says Steven Veator, senior program adviser of Core Financial Services, a Massachusetts-based debt settlement agency.

Recently, much attention has been brought to fly-by-night debt settlement agencies that often only cause participants to go into more debt. If you plan on enrolling in a debt settlement program, the United States Organizations for Bankruptcy Alternatives (USOBA), a professional organization for the debt settlement industry, recommends taking the following things into account before enrolling in a program:

* Know in advance that your credit score will take a hit. Any debt settlement agency promising otherwise is probably not telling the truth.

* Programs will often take two to three years to complete. If you can't make the payments necessary to complete the program, don't enroll because you will still be responsible for your debts in addition to any program fees.

* Beware of hidden fees. Make sure all fees you will have to pay during the program are agreed upon before enrolling in the program, along with a payment schedule. The program will likely charge you beyond what you will be paying back to your creditors for their work, so make sure it is still a good option once these fees are included.

* Debt settlement is a private industry, so any organization that speaks of a federal program for debt settlement is not telling the truth.

* Don't stand for pressure or silence. A legitimate agency should not pressure you to enroll and should allow you the time to make a decision. You should also be able to freely and easily communicate with the agency before enrolling and during the debt settlement process. Some programs require you to default on paying your creditors, so have a plan in place with your settlement agency on how to handle calls from creditors if this is the case.

For more on debt settlement and answers to frequently asked questions, visit www.coredebt.com.

Courtesy of ARAcontent .