Rather than opting for a solution that causes near permanent damage to your finances, you should make use of other alternatives to overcome your credit card debt. There are many reasons why bankruptcy is not the preferred option. For starters, it is not very easy to get hold of a bankruptcy. There was a time when you could file for bankruptcy without any problems.

Today, going in for a chapter seven bankruptcy means you will have to accept a credit counseling session. This will run its course and you will have to prove that you have learned and benefited from the same. Next, you cannot opt for bankruptcy for a specified period of time once you have chosen a particular solution. This means that you shall be completely exposed to future problems without any protection whatsoever. Finally, the benefits that bankruptcy offers are not as good as they made out to be.

Your debts will come down but you will also lose your assets in the process. All your nonexempt assets will be left in your hands. However, the law has been designed in such a manner that only those assets that are essential for the individual’s living shall be exempted. You will have to say goodbye to all those wonderful assets and investments that you have made over the years. Instead, it makes sense to go in for a debt settlement. Debt settlement transactions have been around since the 1980s.

Yet, bankruptcy was popular because lenders were not keen on offering a high settlement. However, it is possible to secure settlement in excess of 50% to 60% today. How? This is become possible because lenders have received support from the government. The stimulus package is in the economy and this makes a huge difference.

Further, the negative impact on the credits score caused by debt settlement can easily be bypassed with the help of prompt repayment of debts and proper financial planning. However, no amount of credit repair strategies and tactics will help you overcome the damage caused by bankruptcy. You will have to wait for 5-7 years before you even think of an improvement in your credit history.

Bankruptcy has always been an option of last resort. Now that settlement, a much better solution, is available in market, you should go in for the same before you choose any other solution.

If you have a collection account on your credit report and would like it removed. Here is how you do this.

Is the collection debt is NOT paid off? This is actually good because now you have leverage with the agency/creditor. First, negotiate with the collector that you are willing to pay the debt, if they will remove the negative items from your credit report. Here are few things to remember when negotiating.

1) Don’t let me them bully you around. You are in the driver seat because you have the money.
2) Offer something much lower than the debt amount they are trying to collect on. Even as low as 50%. Often times the debt has outrageous fees and interest tacked onto it. Also, the agency ‘bought’ this debt from the creditor at pennies on the dollar so any debt they collect is good for them.
3) Don’t give up until you have an agreement that you are satisfied with.
Once, this is verbally agreed upon, write out a check in the agreed amount and then write a letter to this affect;

Dear XXXX,

This letter is in regards to our recent conversation (blah, blah, blah). Enclosed is a check (check # XXXX) in the amount of $XXX.XX. By cashing this check, [name of creditor/collection agency] agrees to settle all outstanding debts against [your name here] and considers all collections paid in full. In addition, [name of creditor/collection agency] will remove the ‘collection’ account from [your name here]’s [name of credit bureau] credit report.

Regards,
[your name here]

I have rarely seen this not work. Sometimes I even send in a letter like this without having a conversation with Collection Agency. It’s so tempting to the agency to have that money that they take it (I’ve only had one ever reject it).

Is the collection debt already paid off? This becomes a little trickier. At this point, the best strategy is to keep bothering the creditor, credit bureau, and collection agency to remove the collection account until they take it off.

Write letters to the creditor and collection agency explaining that the debt has been paid and request that they remove the collection item from your credit report. If at first you don’t succeed, try, try, again.

Write letters the creditor bureau asking them to verify the collection account with the creditor. Through the FRCA (Fair Credit Reporting Act), the bureau has a 30 day statute of limitations to verify this information, if not, they are obligated to remove the item from the credit report. Again, if at first you don’t succeed, try, try, again.

There are credit restoration services that are very effective at this ‘letter writing’. Lexington Law Firm is the biggest credit restoration firm touting millions of deletions (free consultation number; 800-223-7615). This makes sense if you have numerous items with multiple credit bureaus. Good Luck.

Taking action to repair your credit is the first move in the right direction. If you are like most people, you may be unsure how to begin. Many people take the “free” route and attempt to repair their own credit. While this works for some, the drawbacks of going solo can be larger than you realize. Below are a few reasons why a credit lawyer may be beneficial to you and your credit score.

1. General knowledge. Do you know your rights under the Fair Credit Reporting Act (FRCA)? Do you know how to draft a dispute letter once you do? Unless you have a strong urge to immerse yourself in the long and arduous task of learning federal law in your spare time, navigating the important first steps to credit repair can be confusing. A lot of background knowledge is required before a single dispute letter can be drafted. Hiring a credit lawyer to help you navigate the laws may be your best option. Attorneys with experience in credit repair have a thorough understanding of the current credit and consumer protection laws. They also know how to apply these laws to help you assert your consumer rights.
2. Tracking paperwork and correspondence. Unless you are an organizational guru who loves categorization and filing, tracking correspondence between yourself and the credit bureau can be an overwhelming and draining experience. You can also expect to spend time and money at the post office; any letters to the credit bureau must be sent through USPS with a return receipt requested. You also need to find a way to track emails, phone calls, and other forms of contact. Law firms have established methods when it comes to keeping records and tracking correspondence. Having an attorney serving as your go-between also saves you the effort of deciding how to categorize a brief phone call or a message on your answering machine.
3. Sacrificing your time. Learning federal credit laws and wading through paperwork is a full-time job, and you probably already have one of those. You can’t drop everything to look up legal terms and run to the post office during business hours. You don’t have several hours each week to devote to your credit file and the expertise it takes to repair it. This is why many people hire a credit lawyer. Even if they have the expertise to fix their own credit, they may not have the resources or time. As a result, they cannot pursue their credit repair as aggressively as they should, and the process becomes lengthier.

You are in debt. So what? Being in debt doesn’t mean you are a criminal; neither does should it make you the object of harassment by creditors and collection agencies. However, you ought to know that having unpaid debts that are charged-off and sold into collections will always come back to haunt you even if you’re able to stop harassment by collectors.

If your concern at this period is to put a stop to harassment by collectors you should know that there’s a set of rules that specify how collectors should conduct themselves when making payment requests from you.

One of the things you want to do is to verify if you actually owe the debt you’re being disturbed about. You have to be really sure considering the amount of reports that have negative information on them – a whopping 80%. And you shouldn’t rule out the possibility of having a negative reflecting an unpaid debt on your file when in actual fact you might have paid up.

To stop collectors from bullying you, you can start by finding out if the agency has got an operational license in your state. Not all collectors have a pass to operate across all states. You may find that the collector harassing you doesn’t even have a legal backing to make collections in your state – this is a good ground to get the collector to stop.

But beyond getting a collector to stop bullying you lays the bigger picture. Will this action erase bad accounts from your file? Will it increase your score? This is what you should be more concerned about, and it should be your next biggest goal behind ending harassment by debt-buying agencies.

You can remove negative accounts such as collections and charge-offs using repair methods such as self-help or hiring an expert repair agency to do the cleaning. You should also involve more in activities that will add positive information to your file such as getting a secure credit card and paying down all your balances.

Credit repair has a very negative connotation. It is open to a lot of scams and is one of the most investigated financial industries. As a result of such problems a law was passed governing credit improvement entities, the Credit-Repair-Organizations-Act (CROA). In part the law states:

The Congress makes the following findings:

* Consumers have a vital interest in establishing and maintaining their credit worthiness and credit standing in order to obtain and use credit. As a result, consumers who have experienced credit problems may seek assistance from credit-repair organizations which offer to improve the credit standing of such consumers.

* Certain advertising and business practices of some companies engaged in the business of credit-repair services have worked a financial hardship upon consumers, particularly those of limited economic means and who are inexperienced in credit matters.

* The purposes of this title are:

(1) to ensure that prospective buyers of the services of credit-repair organizations (CROs) are provided with the information necessary to make an informed decision regarding the purchase of such services; and

(2) to protect the public from unfair or deceptive advertising and business practices by credit-repair organizations.

In spite of this law there still are many credit-repair organizations that aren’t following the law. Make sure that any credit-repair organization that you decide to use is in fact legitimately providing credit-repair services that meet the CROA.

* No Credit-Repair Organization can charge upfront fees or prepayment for services. They can only bill for services and collect money for services after the services have been rendered. For example, they can change a “setup” fee but only after any setup processes have been completed.

* No Credit-Repair Organization can advertise or state that it can “guarantee” to remove negative items or any item from your credit report. Having items removed from a credit report is similar to filing a lawsuit. The Credit-Repair Organization is challenging inaccurate and negative items on your credit report on your behalf. As with a lawsuit, no one really knows what the outcome will be. Thus a Credit-Repair Organization is prohibited from saying they can guarantee to get these items removed.

* No Credit-Repair Organization can charge a monthly fee until after the monthly services have been rendered. This is similar to the upfront setup fee discussed above.

One way to tell if a credit-repair organization is professional or not is to check to see if they are a member of the National Association of Credit Services Organizations (NACSO).

From their website: “National Association of Credit Services Organizations’ members go through a very strict and rigorous application and enrollment process to aid in the prevention of fraudulent activity throughout the credit services industry.”

“NACSO’s Standards of Excellence will go further than the Credit-Repair Organizations Act and touch on items essential to the honest growth of this industry.”

Go to the NACSO website and enter the name of the credit-repair organization you are considering. If they are a member in good standing and are displaying the NACSO “Standards of Excellence” Seal, then you should be dealing with a reputable firm.

Are you in “Credit Prison”? Boy, it seems like it sometimes. Perhaps you have experienced a job loss, health problem, business loss or a divorce. The result was late payments or perhaps a foreclosure or bankruptcy.

With 7 to 10 year time frames for having the negative items removed from your credit reports, it sure does feel like one is doomed when it comes to credit following such an event. The result of less than stellar credit usually is:

* Higher interest rates on mortgages, car loans, personal loans, and credit cards.
* Higher insurance rates.
* Inability to get a job.
* Trouble renting an apartment without a cosigner.

However, there are things that you can do now to help rebuild your credit. You can legally repair your credit, without resorting to illegal tactics such as getting a new identity (clearly a fraud), by legally challenging the credit bureaus to remove any and all inaccurate, outdated and unvalidated negative items from your credit reports.

How do you do this?

* Well, you could hire an attorney who is highly experienced in credit law. They challenge the credit bureaus and your creditors to “validate” each and every negative item on your credit report. They do their best to back the credit reporting agencies into a legal corner where the agencies have no choice but to remove the so-challenged negative items.

If an item can’t be validated (not just verified) and some aspect of the reported item is inaccurate, the law requires the credit reporting agencies to remove such inaccurate, outdated and unvalidated items including bankruptcies, liens, judgments, late pays, repossessions, and foreclosures. The downside? Most attorneys will charge you thousands of dollars.

* You could hire a credit repair organization who consults with you, writes dispute letters on your behalf, and who knows the best and most effective ways to challenge negative information and improve credit scores.

As discussed above, many of these are scams and some can be very costly charging upfront and monthly fees that total hundreds if not thousands of dollars to do the same thing you can do.

However, many are reputable and professional. As noted above, make sure anyone offering credit repair services meet all aspects of the CROA (Credit Repair Organizations Act).

Also, many states have special regulations for Credit Repair Organizations. Check them out for your state, and also contact the Better Business Bureau for your area to see if there are any complaints against the CRO you are considering.

* Or, you could DIY, “Do It Yourself”. With the right training and knowledge you can do a pretty good job yourself. You do this by investing in credit repair courses and eBooks. Learn all that you can and then start the process of challenging inaccurate, outdated and unvalidated negative items. This is not an overnight project. It takes time and perseverance.