American Debt Girl - Legal Debt Elimination

Legal Debt Elimination

Hi everyone, American Debt Girl here! Today I want to explain all the options available to you when it comes to legal debt elimination. To really prove that these options are legal, I contacted my friend Elle. Elle was one of my sorority sisters who decided to go to Harvard Law School after her boyfriend broke up with her right before graduation. Now she's a hot-shot lawyer, but she only defends those who deserve to be defended!

Anyway, Elle said that when it comes to legal debt elimination, there are four good options, and one that's not so good. Let me explain about them all:

Debt Settlement - Let's just get this one out of the way because it's the one Elle and I hate the most. It's the one that's not so good. However, it's still considered legal debt elimination. Debt settlement is borderline theft, if you ask us. What happens is a debt settlement company contacts all your creditors to get your balances reduced by 60-80%. Granted, 60-80% off is a great sale, but in this case, it's money you actually spent, so you have a moral obligation to pay back at least that much. There's nothing wrong with trying not to pay interest and fees, but you should at least try to pay back what you spent. Anyway, if your creditors agree to this, they will want their money right away. And they'll report it to the credit reporting agencies and it will have a negative effect on your credit.
Debt Consolidation - This is a very legal debt elimination program. What happens is you contact a debt consolidation company and they contact your creditors to get your balances reduced by getting fees removed and interest rates lowered. Then they bundle up all the new balances and you pay the debt consolidation company one payment each month. They make sure your creditors get their money, and your balance is paid off in five years.
Student Loan Debt Consolidation - This legal debt elimination program combines all of your student loans, gives them one low interest rate and lowers your monthly payments by as much as 50% (because they stretch them out over a longer period of time).
Debt Consolidation Loan - This isn't really like total debt elimination. It doesn't get you any reductions like debt consolidation does. It's just a loan given to you to pay off your unsecured debts all at once. Then you just have the loan to pay back. However, you have to have collateral. The benefit is that the interest rate on the loan is so low that you can be out of debt in five years!
Debt Consolidation Mortgage - Oh my gosh! This debt elimination program is our favorite of all debt elimination programs! But you have to have a house. You can't be renting. Your name has to be on the mortgage. What happens is that you get a loan from your mortgage company to pay off all your unsecured debt, then that amount is added to your mortgage. So you're essentially paying off all your credit card debt at the same interest rate as your mortgage, which these days is typically 4-6%! Your mortgage payment does go up, but not by much.

The key to the effectiveness of any legal debt elimination program is to make sure you learn how to stay out of debt once you're out. If you go nuts and rack up your credit card debt again, you'll have to go through yet another debt elimination program like...credit card debt elimination. And it might not be as easy this time!

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