I'm in debt and have lost my job, what to do? (part 1)
The U.S. Bureau of Labor Statistics registered a 9.6% unemployment rate for August 2010.
If you are one of the those who is unemployed, whether you can't find a job, you can't work (due to special circumstancestemporarily or permanently), or have recently been let go by your company, this article would explore with you, some options to reduce or eliminate your unsecured debt.
But first, a brief background on your debt.
What is unsecured debt?
Unsecured debt, is money you borrowed, that is not tied to any property (as collateral). It could be a loan or your credit card bill. The amount extended by the lender or creditor depends on the borrower's earnings. The interest rate slapped on borrowings depends on the borrower's credit standing. The poorer it is, the higher the interest rate, and the likelier the chances of never getting out of the debt cycle. There are even some cases in which theamount of the interest accrued, is greater than the actual amount borrowed, which leaves the borrower feeling victimized by an undefined evil.
But evil is not undefined--it's the non-transparent and unfair creditor practices, which the Obama administration has already addressed with its Credit Card AccountabilityResponsibility andDisclosure Act of 2009.
The private sector has also been, in a way, advocating for the hapless borrowers. Companies representing the borrowers to their lenders belong to the
debt relief industry or the debt consolidation/negotiation companies.
In a worsening unsecured debt situation, in which the creditor seems to be winning, the consumer is left with no defense, or no defender, until the concept of debt negotiation or debt settlement. Debt negotiation has always been an option for consumers experiencing financial hardship but it's not that popular, because, credtors do not really announce that they offer what's called a "hardship program." Why would they? But that's not to say, that they do not really offer or present their hardship program as an option to consumers, because they doif they see that their client is leaning strongly towards filing for bankruptcy.
What is a hardship program?
It's usually about altering the interest rates. Depending on the level of hardship, with proof, the credtor can lower the rates, extend, or freeze it for a time, so their client can get at the principal amount owed quicker.
Does the hardship program include reduction or discounting the principal amount of debt?
Unfortunately, no. That's why there is debt settlement. Debt settlement is about negotiating the total amount of debt, down to more or less half of its original amount. This is not a favorable program for the lender, as you can imagine, because their position is to always collect the full amount, and not less than the full amountwhich is what debt settlement is all about.
I'm in debt and have lost my job, what to do? (part 1)
By: Summer Quinne
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