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Economic Debt

As anyone who is awake knows, America’s economy is in recession. Unemployment is at record breaking high levels, with the U-6 (…the truer government indicator of unemployment) closing in on fifteen percent. Couple to this the country’s anemic growth, prospects for better future growth dim and government spending approaching twenty-five percent of GDP, the United States of America is in dire trouble. And if that is not bad enough, our current deficit is fast approaching seventeen trillion dollars.


This depressive economic situation has a real-world impact and we see it every day with the abysmal lack of consumer confidence, which manifests itself with the slowdown of day-to-day consumer spending. In turn, this affects the way our country’s businesses operate, slowing their operations, forcing cutbacks and quashing any future expansion plans. As business scales back and downsizes, workforces are likewise affected.


As consumes are now faced with dwindling prospects and smaller paychecks, what was one comfortable is suddenly changing for the worse. Consumers now face debt-to-income rations that have flipped from livable to suddenly unmanageable. Because of diminishing incomes, serviceable debt has become just the opposite, as fixed debt now begins to crush the life out of most American households. This situation is beginning to create a new and severe crippling of our once great society.


Something has to give


As specialists in attorney backed debt solutions, we recognize this and are motivated to bring the consumer the best information that will allow the consumer to make the best choice for their particular situation.


  • WHEN DEBT SETTLEMENT MAKES SENSE:Open or Close

    Although debt settlement is not for everyone universally, for a great many people, it can be a lifesaver. As the industry is largely unregulated, it is important that when looking into a debt settlement company, it is advisable to exercise caution. This is not as complicated as it initially sounds.


    If you find a company that you can trust, such as the Frank L. Kucera & Associates, PC., it may be worth considering. This is because Frank L. Kucera & Associates, PC. not only specializes in Debt Settlement and Debt Settlement law; they have an “A” Plus rating with the BBB and have been effectively and successfully practicing in this field of endeavor for over twenty-two years.


    Debt settlement is sometimes confused with debt consolidation and also often confused with Consumer Credit Counseling or Debt Management.


    They are worlds apart:

  • DEBT CONSOLIDATION:Open or Close

    Debt consolidation is where borrowers are offered one big loan to pay off their smaller debts and often this is offered to borrowers as a home equity loan. This can sometimes offer a little relief in a lower interest rate. However, the problems are manifest, as this is akin to trading in intestinal cramps for a migraine.


    This first issue to consider is that when you “consolidate debt” using the instrument of a home equity loan, you will automatically paint your house with a secured obligation, and do so from a bucket of unsecured debt. This is not a very wise financial decision, as it will mean that a homeowner will reduce any remaining home equity by the amount of the secured loan. In turn, this will probably evaporate any usable funds should a “real” emergency arrive… and paying off unsecured debt should not be considered a “real” emergency, especially when other thoughtful avenues to solve this problem exists.


    Also, a debt consolidation loan does not cure the overall issue. Transferring unsecured debt to a secured remedy is only that: a transfer. It doesn’t eliminate the debt; it just camouflages it under the roof of your home. That is, until the camouflage is stripped away when a credit check is done, and it is found that you still have the same debt-to-income ratio. As it is today, most folks think that their credit rating is the “end all – be all” of one’s credit existence and simply put, that is not the case.


    If one considers his personal financial picture as he would a book, then the cover of that book is the credit score. It is there so that the lender can consider if the cover of a particular book is interesting enough to get him to open that particular book. It is at that point that the lender’s primary focus will be on an applicant’s debt-to-income ratio, as this is the “holiest of all holies” to any lender… and where any credit application will live or die. Unfortunately, in today’s environment, most of those books are being slammed shut… and a home equity loan, no matter how good it’s interest rate, will simply not change the reality of an over encumbered debt-to-income ratio. As a matter of financial fact, an over encumbered debt-to-income ratio will probably mean that an application for a consolidation loan will ultimately be rejected.

  • CONSUMER CREDIT COUNSELING (…OR DEBT MANAGEMENT):Open or Close

    Consumer Credit Counseling (aka: Debt Management) is an industry originally created by the credit card companies back in the early nineteen eighties. This alone should offer you a clue as to who; side these companies will ultimately be on.


    You’ve heard their advertisements, either on the radio or the television. Besides all the touchy, feely ad copy designed to may you sigh with comfort, two prime points are made to bait you into considering their services:


    1.   They state that will lower your interest rates; and

    2.   They are “non-profit.” (…generally they say this with the violin music gently playing in the background.)


    The first point is true. If one of your creditors participates in THAT consumer credit counseling’s program, (your first hurdle), then yes, they will reduce the interest rate.


    However, they will NOT eliminate the interest rate. Keep that in mind.


    As to their being “non-profit…”


    Please understand that a non-profit status is a business formation allowed by the IRS. A company of this nature will balance their ending assets with their ending liabilities, thereby showing no reportable profit. However, this business formation is also employed as a “marketing gimmick” to lure the unsophisticated into thinking, “Oh wow! They don’t make any money off of me.”


    If think a bit further and make use of just a few critical thinking skills, we should ask the obvious: Do we know anyone that works for free?


    If we look at consumer credit counseling programs critically, you will find that when discussing their program with one of their counselors, they will tell you that they will charge you a small set up and monthly administration charge to “cover their expenses. Taken in context at that moment, it appears reasonable to anyone looking into their program. However, what is not disclosed with the potential client that is listening to the explanation of a program of this nature, nor are they required to disclose this, is that these companies will charge something know as “Fair Value,’ or “Fair Share.” This is a charge of anywhere from, on average, of a fifteen to twenty-five percent fee based on everything they take in the form of a payment as their actual fees.


    Although seldom done initially by anyone entering a consumer credit counseling program, this is simple enough to figure out. Simply multiply the amount of money they require each month by the length of the program, in months, catch your breath, and you will arrive at the total outlay, in dollars, that they will require to finally alleviate your debt.

  • DEBT SETTLEMENT:Open or Close

    When an attorney works to settle a debt in a debt settlement process, the consumer first begins to deposit his or her monthly payments into an attorney/client trust account set up by the attorney on their behalf. Once enough money has built up in this account, the attorney and professional negotiator will attempt to settle the debt for a smaller percentage of the total debt owed.


    The negotiator will negotiate a lump-sum settlement, which can oftentimes provide the consumer with the most aggressive position. In some cases the debt can be negotiated for as low as 20 cents on the dollar.


    In short, the negotiation results in convincing your creditor to put your debt on sale, so it can be bought back by you at the sale price.


    This program would be recommended to a consumer who already has issues with a poor credit rating, or a consumer whose debt-to-income ratio is beginning to suffocate his day-to-day living. So, a candidate considering debt settlement would be best to ask themselves. “What is more important to me today… Getting out from underneath this debt and starting fresh again… or being able to keep buying more and more stuff?”


    If you think that debt settlement may make sense for your circumstances, then we encourage you to call us at 888-295-5040


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