Home Chad Van Horn Crushing holiday debt? You’re not alone

Crushing holiday debt? You’re not alone

Holiday gift giving and over-the-top celebrations often give way to New Year’s debt, debt that strains your finances at best and take years to pay off at worst.  You’re not alone:  American consumers piled up $1,325 debt on average this holiday season with 44 percent taking on debt, according to a recent Magnify Money survey.

Staring down your debt may prompt New Year’s resolutions, complete with cutting up credit cards and a full-on search for ways to improve your crushing financial situation.  You may consider battling down debt on your own, paying it off or turning to debt settlement.

Debt settlement might be an option, but with a few caveats. Debt settlement companies are in it to make money, let’s not forget that. They negotiate a lump sum payment to your creditors that settles your debt.

Debt settlement companies typically have you deposit a sum of money every month for 36 months –three years – into an escrow account that will be tapped by an independent party to settle the debts.  If you’re having trouble with keeping your head above water now, think about making these deposits while still paying your bills down.  Plus, the fees for the administrator and the debt settlement company come out of that account as well.  You do have some protections, such as disclosing fees and terms, how long it will take to get results, and what can happen if you stop paying your creditors in order to fund the account appropriately.

Faith Based Events

Then you can pay it off.  All of it.  Month after month.

Let’s say that you owe $50,000 in credit card debt. Yes, it is possible – people get a card to start paying off debt on another card, charge on the emptied card and round and round we go, racking up debt on top of debt. So, $50,000 – and if your credit is bad enough from late payments and delinquencies you can pay as much as 29.9 percent in interest. At $1,200 a month, that’s not even enough to make up the interest charges. $1,300 a month will get you on top of the interest, but you’ll be paying 1,300 a month for 129 months – almost 11 years. In fact, in order to get that term down to five years, you’re looking at paying $1,760 per month, or $2,800 a month for two years.

Another option is to consider bankruptcy.  You get to a place where you understand that there are worse things than having to start over. With bankruptcy, you settle your debts and exit bankruptcy free and clear. You can start over again, and while it won’t be easy, you have the chance to start building a good credit history from scratch, without payments hanging over your head.

Bankruptcy, Chapter 7 or Chapter 13 for individuals and Chapter 11 for businesses, isn’t the worst fate ever, in spite of its unfortunate stigma and negative effect on credit ratings.  It’s worth considering, like all options, to reach your New Year’s resolution of eliminating debt and the overwhelming stress it causes. 


Chad Van Horn, Esq., is the founder and managing partner of Van Horn Law Group, the largest bankruptcy firm in Broward County based on cases filed in the last 12 months.  He is the author of Everything You Need to Know About Bankruptcy in Florida.


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