Debt Relief Options in Missouri

Debt Relief Programs in Missouri

Missouri residents struggling to pay off debt can find assistance programs at banks, credit unions, online lenders, and for-profit and nonprofit debt relief companies. These programs include debt management, debt consolidation loans, debt settlement, and bankruptcy.

Here is an outline for how debt relief works with each program:

Debt Management Program

Debt management programs are an efficient way to pay off high-interest unsecured debts without having to take out a loan. If you qualify, these plans reduce the interest rate you pay to around 8% (sometimes lower) and provide affordable monthly payments that eliminate credit card debt in 3-5 years.

The counselors at nonprofit credit counseling agencies are certified by the National Foundation of Credit Counseling, and t the certification is renewed every two years.

Your credit score will drop slightly at the start of debt management programs because you are asked to close out credit cards, but as long as you make on-time payments and pay off the total amount of what you owe, your credit score should improve dramatically.

» Where to find it? – Debt management programs are offered by nonprofit credit card counseling agencies and allow you to 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.

» Is this right for you? – Debt management is a viable option if you have high-interest credit card debts that you are unable to pay. Consumers should keep in mind that interest rate concessions made by lenders will be void if any monthly payments are missed.

Debt Consolidation Loan

With debt consolidation loans, consumers can pay off multiple high-interest credit card debts with a single, low-interest loan from a credit union, bank, or online lender.

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 rates likely will be too high to be an advantage.

» Where to find it? – Banks, credit unions, and online lenders offer this type of debt relief. You should compare lenders to find the best rates.

» Is this right for you? – If you have a credit score above 670 and can stop using of credit cards, debt consolidation loans could be the right option.

Debt Settlement

Debt settlement allows consumers, or better yet the settlement company, to negotiate with creditors to pay less than what was originally owed. Although this option can sound enticing with promises or large debt reductions, the claims are rarely true, and this debt-relief option can hurt more than help.

Debt settlement companies advise consumers to halt credit card payments, which can lead to late fees and increased interest payments, making it more difficult to pay off the balance. Debt settlement also hurts credit scores, potentially dropping them as much as 100 points.

» Where to find it? – Seeking companies that specialize in debt settlement is key when considering this option. These companies can negotiate on your behalf with creditors to agree on a reduced sum.

» Is this right for you? – For those who can no longer make regular payments toward their credit card debt and feel like the only other option is bankruptcy, debt settlement may be a better choice. Consumers should make note that there are many negatives associated with debt settlement and creditors have no obligation to agree to reduce your debt.

Nonprofit Debt Settlement

Nonprofit debt settlement is similar to for-profit debt settlement – the goal is for the consumer to pay less debt than what is owed – but there is one major difference: there is no negotiating.

Nonprofit debt settlement allows consumers to eliminate credit card debt by paying less than what was owed,– typically 40%-50% less — over 36 months. This form of debt relief is unique because there is a 0% interest rate on the debt over the three-year payment period.

Consumers should consider that qualifying for nonprofit debt settlement can be difficult and consumers must make on-time payments without missing for 36 months, or the program is canceled.

» Where to find it? – 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.”

» Is this right for you? – Nonprofit debt settlement is ideal for consumers who are in default status, which means no payment on their credit for 180 days.

Bankruptcy

Bankruptcy might seem like an enticing option since it is marketed as a “do-over,” but this should last-resort choice for struggling consumers since bankruptcy has the most negative impact of any debt-relief option.

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

To qualify for Chapter 7 bankruptcy, a consumer must pass a “means test” that requires their income to be less than the median income for their state. In Missouri, the median income is $30,662.

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

In Chapter 13 bankruptcy, 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 for filing 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.

» Is this right for you? – 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 Missouri

The statute of limitations is the time a creditor or debt collector has to file a lawsuit against a consumer for unpaid debts. If the collection agency does not file within the time frame, the consumer can no longer be sued for that specific debt.

Missouri differs when it comes to the statute of limitations in comparison to the other 49 states typical six-year window. In Missouri, the statute of limitations for oral contracts is five years, written contracts are 10 years, promissory notes are 10 years, and open-ended debts are five years.

Missouri residents have several rights when it comes to paying off debt and it is important to understand each one to avoid being taken advantage of by collectors. If a creditor files a lawsuit, consumers need to know how to respond and defend themselves appropriately.

Debt Collection Laws in Missouri

Debt collection agencies often use high-pressure tactics like threats of garnishments or liens 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 protect residents further.

Residents of Missouri 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 Missouri

• Consumer Debt: The average consumer debt in Missouri is $77,537, over $20,000 less than the national average.
• Mortgage Debt: Missouri residents have an average mortgage debt of $155,203 ranking them 9th lowest in the nation.
• Student loan debt: Missouri is ranked No. 26 in student debt with the average borrower having $35,397 in debt.
• Credit card debt: The average credit card debt in Missouri is $5,601, over $1,000 under the national average.
• Auto loan debt: The average resident has $4,740 in auto loan debt, nearly $1,000 less than the national average.
• Average credit score: Residents of the “Show Me” state have an average FICO score of 711, three points under the national average.
• Identity theft: In the past year there were 13,372 cases of identity theft in Missouri, the 28th highest in the U.S.
• Foreclosures and bankruptcies: Missouri had the highest bankruptcy rate last year with 251 cases filed for every 100,000 residents.