Debt Relief Options in Indiana

Debt Relief Programs in Indiana

There are banks, credit unions, online lenders and debt-relief companies (for profit and nonprofit) in Indiana that specialize in helping consumers pay off credit card debt.

These companies provide five different types of programs to help with this kind of debt.

The five programs include debt management programs; debt consolidation loans; debt settlement; nonprofit debt settlement and bankruptcy. Each program has benefits and negatives associated with it.

Here is an outline for each program:

Debt Management Program

Debt management programs allow consumers to pay off their credit card debt without having to take out a loan. Nonprofit credit counseling agencies work with lenders to reduce interest rates to around 8% and lower monthly payments to fit your budget. The debt is typically paid off in 3-5 years and counselors are trained and certified by the National Foundation of Credit Counseling. Their certification is renewed every two years.

One benefit to a debt management plan in terms of the effect on your credit is that your score will drop slightly when you start the program, but as you make on-time payments and pay off the total amount of what you owe, your credit score will improve dramatically.

Where to find debt management programs: Nonprofit credit counseling agencies offer debt management programs. You can enroll over the phone with a credit counselor or online. The counselors will help you create an affordable budget that includes payments toward eliminating your credit card debt.

Who is right for debt management programs: If you have high interest credit card debts that you are unable to pay off at the end of the month, debt management programs are a good option. Consumers should note that interest rate concessions made by lenders will be void if you miss any payments.

Debt Consolidation Loan

A debt consolidation loan is a financial strategy to pay off multiple high-interest debts with one, low-interest loan. It makes paying bills simple and saves money for consumers dealing with multiple unsecured debts like credit cards, medical bills or personal loans.

Having a good credit score is vital for receiving favorable interest rates with this program. A score above 700 is ideal, but you can still get fair rates with a score of 670-699. If you have a score under 670, the interest rates most likely will be too high to be any advantage.

Where to find debt consolidation loans: Banks, credit unions, and online lenders offer this type of debt relief. You should compare lenders in order to find the best rates.

Who is right for debt consolidation loans: Consumers who have credit scores that are above 670 and are able to stop using their credit cards, are good candidates.

Debt Settlement

Debt settlement allows for negotiation made by consumers or debt settlement companies to pay less than what is owed on their credit card debt. Debt settlement may seem enticing with promises of large reductions to debt, but the claims are seldom true and can worsen your situation.

It’s possible to negotiate  yourself and save the settlement company’s fees. However, unless you are committed, disciplined, and experienced at driving a hard bargain, you’ll be taking on a huge risk. The creditor, or more likely the debt collection agency that bought the debt, has encountered inexperienced consumers countless times, and knows how to pressure them into paying the full debt, or at least a high percentage of it.

Debt settlement companies advise consumers to stop credit card payments, which leads to late fees and increased interest payments, making it more difficult to pay off the balance. Debt settlement has a negative impact on credit score, dropping it over 100 points in some cases.

Where to find debt settlement: You should seek companies that specialize in debt settlement. These companies are able to negotiate with creditors to agree on a reduced sum.

Who is right for debt settlement: You should consider debt settlement if you are no longer able to make regular payments toward your credit card debt and feel that your only other option is bankruptcy. You should also note that there are many negatives associated with debt settlement and creditors have no obligation to agree to reduce your debt.

Nonprofit Debt Settlement

The difference between for profit and nonprofit debt settlement is that in nonprofit debt settlement, creditors agree in advance to accept 50%-60% of what was originally owed.

There is 0% interest during the three-year payment period.

Qualifying for nonprofit debt settlement can be difficult and consumers must make on time payments without missing for 36 months.

Where to find nonprofit debt settlement: This form of debt settlement is still new, and only available at a few nonprofit credit agencies. Those who wish to find companies should search online using the phrase “nonprofit debt settlement.”

Who is right for nonprofit debt settlement: Consumers who defaulted on their credit card debt should consider nonprofit debt settlement.

Bankruptcy

Bankruptcy might seem like an enticing option since it is marketed as a “do-over,” but this should only be a choice if no other debt-relief options solve your problem. Bankruptcy has the most negative impact of any debt-relief option.

There are two major types of personal bankruptcy; Chapter 7 and Chapter 13.

To qualify for Chapter 7, a consumer must pass a “means test” that requires their income to be less than the median income for their state. In Indiana, that would be income less than $30,902.

The good news for anyone hesitant about this option is that nearly everyone who files for bankruptcy does get a second chance. The American Bankruptcy Institute says that 95.3% of people who file Chapter 7 bankruptcy are successful.

However, if you don’t pass the means test, you could file for Chapter 13 bankruptcy.

In Chapter 13, you have a repayment plan approved by the court that allows you to keep your assets in exchange for making regular payments to pay down the debt. This plan typically lasts 3-5 years, with any unsecured debts like credit cards being discharged at the end.

Consumers should note that there are severe consequences to filing for bankruptcy. Credit scores drop 100-200 points. Filing bankruptcy is a negative on your credit report for 7-10 years, making it difficult to get a loan.

Where to file for bankruptcy: Before filing at a federal bankruptcy court, consumers are encouraged to consult with an attorney due to the complex nature of bankruptcy laws.

Who is right for bankruptcy: If you feel that you have exhausted all of your other options and are unable to pay off your debt in five years, bankruptcy may be the only option.

Statute of Limitations in Indiana

The “statute of limitations” for credit card debt is a law limiting the amount of time lenders and collection agencies have to sue consumers for not paying. If the collection agency does not file within the time frame, the consumer can no longer be sued for that specific debt.

In Indiana, the statute of limitations is six years and begins on the date of the last payment on an account. This also means that if you make a payment on your debt at any time in the six-year span, the clock restarts.

Debt Collection Laws in Indiana

Debt collection agencies like to use high pressure tactics like threats of garnishments to intimidate the consumer into paying the debt. Although the U.S. has laws to protect consumers from debt collectors, some states have their own laws to further protect residents.

Residents of Indiana fall under the Federal Debt Collections Protection Act, which prohibits collection agencies from harassing borrowers or using unfair or misleading tactics to collect debts.

Debt Statistics in Indiana

Consumer Debt: The average resident in Indiana has $73,995 in consumer debt, nearly $2,000 more than the year before.

Mortgage Debt: Residents in Indiana hold $133,314 in mortgage debt, third lowest in the U.S.

Student Loan Debt: When it comes to student debt, residents of Indiana have an average of $32,874, $5,000 under the U.S. average.

Credit Card Debt: Residents hold an average of $4,651in credit card debt, 5th lowest in the Nation.

Auto Loan Debt: The average auto loan debt in Indiana is $4,910, nearly $1,000 less than the national average.

Average Credit Score: The average credit score in Indiana is 712, a five point increase from the year before but two points lower than the national average.

Identity Theft: There were 11,866 cases of identity theft in Indiana last year, 16th lowest in the U.S.

Foreclosures and Bankruptcies: In Indiana, bankruptcies dropped by 17.6% in the last year with 5,634 cases filed.