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Myths about Debt Relief

Myths about Debt Relief

Can I go to jail for having too much debt?
You cannot go to jail for having too much debt. This will never happen! No one will come to your house and lock you up because you didn’t make a payment on a bank of America credit card. However, there are certain things that can happen. If you ignore a court order, you can get a judgement against you. Due to that judgment, you can have wages garnished, a tax lien put up against you and a host of other issues could occur.
How the events play out is all dependent on how you react to the changes and challenges you face.
Will debt pass on to my family members after I die?
What happens to credit card debt after you die is a valid question to ask. Debt can be communal and non-communal depending on what states you live in. In some scenarios the debt of a husband actually can pass onto a wife. In other scenarios the debt of a husband will not pass onto a wife. Texas for example is a communal state regarding debt. So, if your spouse passes away, you will have to presume her debts. This is not the case in a state like New York for example.
So, this varies depending on where you live and what your circumstances are.
The same banks will never work with you again and blacklist you
All respective banks and creditors are different from the next. Just because you settled a debt, that doesn't mean that a bank or credit card company will black list you and have you banned from using their ever banks again. Although settling an account with a company could have a minor impact on your banking relationship, this is not a all or none type of scenario.
Each company is different in this scenario, so it’s important to understand that everyone has different parameters for working with the same customers in the future. However with most companies there isn't a significant impact to the relationship.
My personal experience: I’ve been on the phone with creditors and they asked me to relay messages to a mutual client to ask whether they want to open a new credit card account with the same creditor. Keep in mind this is actually before the credit card account was settled and before payments were actually setup to settle the account.
So, it all depends on which credit card company you’re referring to and what the exact scenario is.
Public Knowledge
If you are in a debt relief program, you will not be publicly ousted for participating in the program. The knowledge isn’t necessarily public, but there are some factors that could change the outcome and it also depends on how your program goes. Since, if you were to receive a summons, some of the information pertaining to the court case could show up in the court system. Here's are a few others scenarios in which someone could potentially know you did a debt relief program, or at the very least that you settled some debts instead of paying them off in full.
You received a summons and they look you up in a local court system
If by any chance you received a summons from a creditor and are served, any that has knowledge of it or the knowhow to look up court records could potentially see that you’ve been sued.
Someone pulls your credit report
If someone pulls your credit report and looks at all your debt accounts and sees delinquencies, hey could potentially conclude that you were in fact in a debt relief program. They would know this by seeing debts that were settled for less than the full amount.
Only people who are behind on their bills can need debt relief
This is in fact very far from the truth, the biggest segment of people doing debt relief are in fact those that are current on their bills and are making timely payments on everything. However, they just find it very hard to make any progress, so much so, to that point that a significant change is needed. That changed often ends up being working with a debt relief company.
There isn’t a change that’s not worth doing that isn’t hard to make. No matter which way you spin it, change is difficult but if your current situation is just simply not working and you are unable to make progress on your revolving debts, you really should consider debt relief as a viable option out.
You should hope for the best but also take action. Debt relief could potentially be best action you can, take if you find yourself in this situation.
On the other hand, if you are already late on your bills and too far behind, you actually might not be a good candidate for debt relief. Simply because paying the debts off in a reasonable time frame might not be possible any longer.
I’ll never have credit again
That is simply not true. You will have many opportunities to have credit again. Banks and credit card companies make a lot of money and for this reason they want the opportunity to lend to consumers as much as possible. They made a lot of profit off you before you thought about settling your debts and often times this still far exceeds the principal amount you borrowed from them plus interest payments. So, if you fear credit card companies not being able to feed their families, you probably shouldn’t. If you factor in all the years of paying interest, most creditors still tend to be profitable on clients, even if they settled their debts for less.
Banks will blacklist so you can’t get a mortgage
Banks will not prevent you from getting a mortgage because you enrolled in a debt relief program. This is very unlikely to happen. Banks make a lot of money on mortgages. If Bank of America says you qualify for a mortgage and are approved, they won’t necessarily care if you settled a debt with them for a $5,000 Bank of America card. A $100,000 mortgage can return massive multiples of its initial investment depending on the interest rate. However, if you want to diversify and get a mortgage through a different lender there would be nothing wrong with that and it should actually be a welcomed change.
Preventing of Auto Loans and Buying a Car
No debt relief does not prevent consumers from purchasing a car or getting an auto loan. However, if you just recently started a debt relief program and your credit score is starting to drop, you should probably wait until your score recovers to acquire an auto loan. You can still get a car loan down the line but you’ll just want to plan for a more opportune time. Either before you enroll in a program or when you’ve completed it. If not consider a time when your score has recovered enough where there isn’t a significant negative to your approved interest rate.
Planning will be your best friend here.
It helps to not get caught up in the minutia of things. The more you can plan the better but don’t get to wrapped in planning where you give yourself cold feet so much so that you’re unable to make decisions either way. Put your best foot forward and try your hardest to move forward given the situation you find yourself in. Hope for the best outcome and always look to take the best path forward.