Managing Credit Card Debt in San Diego, California | McCarthy Law PLC
October 22, 2014

Managing Credit Card Debt in San Diego, California

Credit Card Debt Management Plans Aren’t Your Best Option

The sandy beaches and year-round 75-degree weather that make San Diego such an alluring destination comes with a hefty price tag. Indeed, the cost of living in San Diego is currently 39 percent higher than the national average. And with a steadily growing population (up 8% since 2000), it’s not likely to go down anytime soon. It would seem that people are willing to pay more for the perks of living in Southern California.

The reality is, however, that many people struggle to afford living in Southern California, often by financing and charging basic living expenses. Before too long, they’ve amassed more credit card debt than they could ever have imagined. Fortunately, there are ways to get out of debt – even substantial debt – that do not involve bankruptcy. Two commonly pursued options are debt management programs and debt settlement negotiation.

An attorney negotiated debt settlement is usually the better option:

Credit Card Debt Management

What is a Credit Card Debt Management Program?

The debt management business is one of the fastest growing industries today, with hundreds of new companies popping up each week offering the service. In a debt management program, a debtor makes a single payment each month to the servicing company, who acts as a trustee for the debtor. The servicer then divides and disperses the monthly payment received from the debtor to the creditors. The debtor usually pays a monthly fee in return for this service. The servicer may also negotiate with the debtor’s creditors, sometimes getting a lower payment and interest rate in return for participation in the program.

Who Will Find Managing Credit Card Debt a Good Fit?

Whether a debt management program is a good fit for you can depend on how much debt you have and your potential ability to pay it off over time. Ordinarily, it is a prerequisite to enrolling in a DMP that you close all your credit accounts and promise not to open any new ones over the course of the program. Since many people in debt rely on credit cards to cover basic necessities such as groceries, utility bills and medical expenses, and others use credit cards because of the protections they afford, this strict no-credit requirement is often a deal breaker.

A debt management program can take 5 years to complete, but can take even longer, and does not allow for any flexibility with payments. Thus, DMPs tend to cater to those with a steady job who don’t expect a reduction in their income at any point while enrolled in the program. But even for these people, a debt management plan is usually not the best option.

What is Debt Settlement?

For those who are unable to afford the full amount of their debt for whatever reason, a debt settlement may be the better option. In a debt settlement negotiation, a third party negotiates with your creditors to reduce the amount you pay – and you end up paying only a small fraction of the total debt allegedly owed. The process usually takes between 6 months and 36 months. Instead of making a monthly payment to be dispersed by the servicer, the money you save is deposited into an account where it is held until the amount settled upon is reached. A negotiated debt settlement can eliminate debt legally at a fraction of what is owed without the need for bankruptcy.

What is the Benefit of Having Debt Settled by an Attorney?

Whenever a debt is charged off (usually within 90-120 days after a missed payment), a creditor has three options: sell, settle, or sue. Charge off does not mean the debt has been eliminated. If a creditor chooses to sue you, you will undoubtedly fare better having an attorney represent you in the process. If you’re already represented by an attorney in negotiations, when your creditor chooses to sue, your attorney will be able to take immediate and appropriate action on your behalf.

More importantly, a skilled attorney knows how to negotiate the best possible settlement for you, saving you thousands of dollars and years of time. If you feel like your credit card debt is mounting and you have no way out, contact our San Diego, California office today for a no pressure consultation to determine if a debt settlement negotiation is the best option for you.

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