Surviving Debt { INSIDE } A Quick Answer Guide to Debt Relief. Introduction 1 Debt Getting Help 4-6 About CareOne Credit 7

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1 Surviving Debt A Quick Answer Guide to Debt Relief { INSIDE } Introduction 1 Debt Getting Help 4-6 About CareOne Credit 7

2 Introduction. Please know that you are not alone. There are a lot of us holding it together as best we can. - CareOne Community Member - Joyful77 You re Not Alone. A lot of people are in your spot. Credit cards can be great, but not when they get out of control. When that happens things get rough, and it gets rough for a lot of people. For example, the average American household with a credit card has $9,200 in debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens. If you re in a spot like that or worse remember, you re not alone. CareOne Credit services providers (CareOne) have helped over 4.5 million people take control of their finances, and can do the same for you. First Things First. From where you sit now, it might be hard to believe that you can get your finances under control. But many people have done it. There s no reason you can t. Just think for a minute about how much you hate feeling the way you do now. That s all the reason you need to make a change. Here s how people who faced situations similar to yours felt after they made the change to CareOne: After a few more months we should be completely debt-free! We have actually been able to open a savings account and will continue to save instead of spend! Life looks darn good from where we are sitting now! - Sharyn L., Serving Overseas Everything has improved. I bought a house, I have been able to purchase a car that is reliable, and I can still catch a movie and take my kids for a burger now and then. It has been very liberating and the best thing is that I feel empowered. - Shaun P., Toledo, OH Avoiding bankruptcy has allowed me to once again gain my self-esteem and independence. - Edward M., Philadelphia, PA 1.

3 Debt 101. There s a saying that what you don t know can t hurt you. But when it comes to debt - especially credit card debt - what you don t know can hurt you. - Joseph K., Baltimore, MD The Minimum Payment Trap. Here s where a lot of the problem starts: when you pay the minimum payment it looks like you re doing what you should. The bill says minimum payment due. So you send that amount. The thing is, you aren t really lowering the amount that you owe very much, or at all. Sometimes you re just paying the credit card company s interest. If you have a balance of $10,000 it could take you sit down before you read this 20 years before you re paid off! The example below illustrates the minimum payment trap. Let s say you owe $10,000 at a 19% interest rate. After five months of minimum payments, you ll have paid $1,087 to the credit card company, but only reduced the outstanding balance by $305. At this rate, it will take over 20 years to get out of debt. Payment Applied to Month Balance Payment Interest Balance 1 $10,000 $220 $158 $62 2 $9,938 $219 $157 $61 3 $9,877 $217 $156 $61 4 $9,816 $216 $155 $61 5 $9,756 $215 $154 $60 $1,087 $782 $305 Monthly Payment Total $1,087 Interest Paid $782 Reduction In Balance $305 2.

4 Debt 101. Prioritize Your Debt Payments. If you have money coming in every month, but are struggling to make all your payments on time, you may have to make some hard decisions regarding which debts to pay off first. Unfortunately, there is no magic formula for the order that debts should be paid. The information below should serve as a guide as you make your critical decisions. Priority 1: Household Expenses Family necessities such as food, or unavoidable medical expenses. Housing related items, like rent, mortgage, real estate taxes or any expenses that could lead to the loss of your home. Minimum utility services. Priority 2: Other Important Debts Car loans or leases. Child support debts. Boat or RV debts. Income tax debts. Priority 3: Unsecured Debts (Debt with Little or No Collateral) Credit & store cards, medical bills, legal bills, past-due utility bills. Loans with household goods as collateral. Creditors rarely seize household items because they have little market value and it s hard to take them without involving the courts. Fees owed for bounced checks. Student loans if you owe student loan debt. Get Started Now. So how do you get started? You already have. Your money situation bugged you enough to seek out help. You ve already gotten some tips for how to start straightening things. Good start! You re not hiding from your problems, you re dealing with them. And you re dealing with them now, before they get even more out of control. 3.

5 Getting Help. If you re falling behind on your bills especially your credit card bills seeking professional help can be a good idea. Debt relief companies discussed in this section specialize in unsecured debt such as credit & store cards, medical bills, and past due utility bills. If your main problem is with secured debt, like your mortgage or car loan, you should seek assistance elsewhere. If mortgage debt is your main issue, a list of counseling agencies can be obtained by calling the Department of Housing and Urban Development (HUD) at Debt Management Plans. Debt Management Plans (DMPs) work to pay off all of your unsecured debts. Once you start making regular payments under a DMP, most creditors lower your interest rate on your credit card account to lower the monthly payment. This means more funds go towards paying off the principal instead of the interest charges. This means a faster payoff of debt and less interest charges. Your payments are also grouped into one payment that you can send from your bank account electronically to your agency. Your agency will then send out the payment to each creditor. DMPs usually charge a set up fee and a small monthly fee. You may have heard that a DMP will trash your credit report, or even that it s worse than bankruptcy. Neither is really true. (Letting your debts go on uncontrolled will do that.) DMPs or credit counseling may have some effect on your credit, or they may have none at all. What happens to your credit largely depends on how your creditors report your account to the credit bureaus and the status of your accounts at the time of your enrollment. A MSN Money article reports: First USA, the credit-card giant, reports its customers as delinquent on their bills until they make three consecutive payments of the new minimums negotiated, said spokesman David Webster. Citibank simply adds a note to the credit bureaus files that the customer is enrolled in debt management. We always viewed that as a positive, said Citibank spokeswoman Maria Mendler. We ve seen that for people who enter these programs, there s a significantly lower rate of default. The credit score formula used by most lenders, known as FICO, now ignores any reference to credit counseling that may be in your file, said Craig Watts, spokesman for FICO creator Fair Isaac & Co. 4.

6 Getting Help. Other Information You Should Know about DMPs Credit cards placed on the program are closed. Your one-time enrollment fee should never be higher than $50. Your monthly program fee should also never be higher than $50. If you are considering debt management, visit us at and use our online enrollment tool to see your savings online in 10 minutes. We also offer live help by phone, chat, and . Debt Settlement Plans. Debt settlement programs are often confused with debt management plans, however they are very different. Debt settlement (also known as debt arbitration, debt resolution, or debt negotiation) is an aggressive approach to debt resolution which may be appropriate for people with a serious amount of debt (usually higher than $10,000) who are considering bankruptcy due to their inability to make even reduced minimum creditor payments offered through a DMP. In a debt settlement program, the debt settlement service provider negotiates with the creditor to lower the outstanding balance of the debt. Under debt settlement, a client will make a monthly deposit into an escrow account. As the balance of the account increases, the service provider will try and negotiate a creditor settlement for less than what the client owes. Here are some of the pros and cons: Pros Reduces your total debt drastically Lowers your monthly payments up to 70% Provides flexible payment arrangements (changes can be made if needed) Attractive alternative to bankruptcy Settlements typically completed in 3-5 years Cons Credit profile may be negatively impacted Debt is not repaid in full Debt balances are likely to increase (i.e. late fees, interest) while settlements are being negotiated Collection activity may escalate You may be taxed on the portion of the debt you don t pay back If you are considering debt settlement, visit us at and use our online enrollment tool to see your savings online in 10 minutes. We also offer live help by phone, chat, and . 5.

7 Getting Help. Bankruptcy. Bankruptcy is a legal process under federal law designed to help individuals and businesses get protection from their creditors. Bankruptcy is typically called the option of last resort and can be the right choice if you have no other way to deal with your debt. Even though you may want to try other options, you shouldn t wait until the last minute to start the bankruptcy process. If you wait, you could lose some important rights. For instance, you must receive budget and credit counseling 180 days before filing. Other Information You Should Know about Bankruptcy It can be complicated and may require legal help. It temporarily stops almost all creditors actions against you. It may permanently wipe out your legal obligation to pay back many of your debts. If you file, you don t usually need to go court. There are several fees, including attorney s fees and court filing costs. 6.

8 About CareOne Credit. CareOne Credit is a nationally recognized brand of credit counseling services. Agencies providing this service have helped over 4.5 million people with their debt. CareOne service providers have years of experience providing sound and legitimate solutions to people looking to conquer their debt once and for all. CareOne does its best to make its services affordable. None of its services come with a big upfront fee and your new monthly payment, including fees, should be lower than what you are paying today. CareOne providers offer a variety of debt relief solutions, all of which can help you become debtfree. Debt Management (DMP) CareOne s most popular service is online debt management, which allows applicants to calculate and review their reduced payment and savings online. Debt Management is also provided by phone. Debt Settlement Debt Settlement is an alternative program designed for people who cannot afford a DMP. With this service, you pay back a portion of your debt to your creditors and it helps avoid bankruptcy. Online Community We recognize that ongoing support is critical in helping you live a debt-free life. The CareOne community allows you to connect with others in similar situations, ask experts for advice, and share your own experiences in tackling debt. Join in now by visiting It s free to everyone! For more information, visit CareOne at or call us today toll-free at