Credit card debt has been a favorite topic of mine for 11 years – since the Great Recession. It was at that time that I watched the credit card industry slash its customers available credit leaving them with no cash in the bank, no available credit and for many –– no jobs. Worse yet, many learned of the reduction in credit when their use of the card was declined (embarrassingly) with the follow up letter coming a week later from the credit card company. That’s when I came up with Debt Resolution – not what you hear about as Debt Settlement. Debt Resolution is how we resolve credit card debt. It is premised on the theory that if you are able to make the minimum payments, we use that source of funds to settle the debt in a 18-24-month window. After that – your debt is zero and the minimum payments you were paying (for example, on $70,000 of credit card debt, the minimum payments come to $1,750 per month) go to savings – forever! Over 15 years, $1,750 per month at 5% interest equals $368,834. For most people, if they don’t’ do Debt Resolution, they continue making the minimum payments and 17 years later – they still owe $70,000. The difference is life changing.
Debt Resolution is not for everyone. While the Debt Settlement companies advertise that their program is for everybody because you don’t have to file for bankruptcy – they are misleading people. The best solution to get rid of debt is the one that is the least cost and fastest. If you don’t have the income to make the minimum payments, you probably qualify for a Chapter 7 bankruptcy. In my view, getting rid of $70,000 of credit card debt in four months for less than $2,000, is better than Debt Resolution which requires 18-24 months at $1,750. Debt Resolution is the optimal solution when a Chapter 7 won’t work for you and, after analysis, you confirm it is cheaper and faster than a Chapter 13 bankruptcy. We do this analysis before we recommend someone to do Debt Resolution.
Prior to COVID-19, the amount of credit card debt ramped back up to exceed the levels of the Great Recession and there was plenty of commentary in financial publications that we were at the critical stage when defaults would escalate. COVID-19 has taken the problem further. Not to the next level – but to the three levels further. My advice – if you already have too much credit card debt, keep using the cards and if your find your available credit is tapped out – you should then investigate the benefit of Debt Resolution or an alternate solution to eliminate the debt. I’m not suggesting today that you should use the cards with no intention of paying them back. I am suggesting that if you find that after you have used the cards to their max, rather than paying the minimum payments for the rest of your life – you should then investigate your options. If you do so, it will be the smartest financial move you ever make.
These are tough times and require tough measures. One bright spot, I’m quite sure the settlements we were able to obtain at the height of the Great Recession will pale in comparison to what we are able to accomplish as a result of the Pandemic. I’ve spoken with several collection firms already – on consumer and business debt – and they all concur. Of course, we’d all prefer there was no Pandemic. Unfortunately – we only get to choose the roads that are open.
We will have a Webinar on this topic on May 20th – but for now – check out below this coming Week’s FREE Webinar on Necessary Estate Planning Steps In View Of The Coronavirus.
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