People in Virginia who have a large amount of credit card debt might be thinking about seeking guidance from a debt negotiation firm. These firms can negotiate with credit card companies on the consumer’s behalf and help them reduce or eliminate their debt over a period of 24 to 48 months. However, there are many misconceptions about what else these services can and cannot do.
Although some people believe that credit card counseling is a better option than debt negotiation, the long term costs are often lower with debt negotiation. When calculating the costs, people must take fees and interest rates into account. In addition, debt negotiation firms are not allowed to require payment upfront due to rules passed by the Federal Trade Commission (FTC). The consumer only pays fees after they agree to the settlement the firm has worked out.
Consumers may be worried about how debt negotiation will impact their credit report. The truth is that it will not erase the record of the credit card debt. Information will remain on the report for the standard term of seven years. Another factor consumers need to consider is that as the firm negotiates a settlement, accounts will be delinquent. This delinquency can negatively impact a credit score. Additionally, debt negotiation will not be able to eliminate debt accumulated due to missed child support or alimony payments.
In certain cases, filing for Chapter 13 bankruptcy may be a more effective way to eliminate debt. When they file for this type of bankruptcy, a person will have to agree to a plan under which they will pay off their debts in three to five years. A bankruptcy lawyer may be able to work on a person’s behalf to set up a payment plan that is affordable for them. An attorney may also be able to take steps to stop wage garnishment.