can you tell me about 'debt resolution'

[tricia]

I have heard about this and wondering if anyone knows what this process is all about?

Tricia
www.mommyx12.blogspot.com

[teachermom_7]

We've looked into a couple of things. Not that we're "drowning" in debt, but the increase costs of gas and groceries alone is putting a dent in our current budget!!

There are alot of programs out there. The main things to be careful of are

(1) plans that "refinance" by taking a 2nd mortgage out on the equity in your house. That is NEVER a good idea!! Insurance companies only insure the value of your house, NOT the value of your loan. Alot of people get mixed up on that point and borrow against their equity to pay off debt and then get themselves into problems.

(2) debt counseling services. These aren't "bad" persay, but should be a last resort. When you read the "fine print," these companies have the final say of when payments are issued to your creditors, not necessarily at the same time you pay them. Basically, they take all of your bills, contact your creditors to get lower interest rates and monthly payment amounts and then you pay them (debt counseling service) one lump payment each month.

This can be bad in a couple of ways

~ your payments may not always be made by your counselling service to your creditors on time and you'll begin a history of late payments which can in turn destroy your credit

~ sometimes they'll even go so far as to lower your principal balance with your creditors. This sounds good on paper, but oftentimes creditors report this on your credit report as a "charge off" which is REALLY bad!!

There are good programs out there, just stick with ones through major banks and BBB companies. Always read the "fine print" so you don't end up causing yourself more grief in the long run.

Hope that helps!