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Debt Consolidation in Kentucky
(Note: this is for educational purposes only, and although efforts have been made to keep this up to date and correct, there are no guarantees about the accuracy of anything contained below. It should not be construed as legal advice. For legal advice, please consult with an attorney licensed in Kentucky.)
People in Kentucky, like everywhere else in the country, are no strangers to credit card debt, and as a result, many of its residents find themselves searching for debt consolidation solutions and consumer credit counseling programs. The only problem is very few people even understand how debt consolidation works, let alone what to look for in a debt company. The purpose this page and PayingPaul.Com in general is help educated consumers about credit card debt management programs, as well as what to look for when choosing between different debt providers.
First, one must recognize that are actually two types of debt consolidation services: 1) credit counseling and 2) consumer debt settlement. Credit counseling services are usually offered by non profit debt help organizations, who among other things, can help you with budgeting and provide valuable financial information. If your situation permits, you may want to consider a debt management plan. These are services offered by credit counselors that involve working with credit card companies to lower your interest rates and restructure your debt. Plans last between four and five years on average before one is totally debt free.
It is important that before choosing this type of debt solution you consider all of the drawbacks. For one, because these services are offered by a non-profit, there is no guarantee that the services will be affordable or even legitimate. They do charge fees, and in recent years the IRS has uncovered that many operating in the space were dishonest about the type of services they offered to qualify for tax-exempt status.
Debt settlement, also known as debt negotiation, involves negotiating with credit card companies and collection agencies to obtain discounts off of your principal balance, sometimes by as much as 40-60%. This is a risky approach to getting out of debt because in order to qualify for these discounts one must fall behind on their payments. As the creditors go unpaid, the consumer saves money in a bank account until sufficient funds have built up to offer a settlement. Since the debt is unpaid as the funds accumulate, however, the creditors resume collections activities per usual. That means you may experience debt harassment, your credit score may be affected, and in some cases, a creditor may pursue legal action to collect the balance.
Although both programs can help people manage their debt, neither is an appropriate solution for all debtors. Credit counseling tends to be the best debt consolidation alternative for people who just need help with budgeting or a reduction in interest to make paying off the debt easier, whereas debt settlement is an ideal program for consumers who are in a financial hardship and whose debt problems are much more serious.
Want to speak with a debt consultant? Submit a form today!
Kentucky Debt Management Laws
In Kentucky, there are several regulations that debt management companies must follow in order to operate in compliance in the state. Much of the law deals with the fee limits that debt consolidation organizations, or “debt adjusters” as the statutes refer to them as, must abide by. The state defines “debt adjusting” as “doing business in debt adjusting, budget counseling, debt management, or debt pooling services, or holding oneself out, by words of similar import, as providing services to debtors in the management of their debts.”
Fees
The fee caps are set at the following limits:
-$75 for an initial set up
-$50 for a consultation
-the greater of 8.5% of the monthly amount paid by the debtor or $30 for a monthly maintenance fee
Exemptions
It should be noted that the following entities are exempt from the “debt adjusting” laws mentioned above:
-attorneys licensed in Kentucky
-anyone who is a regular full time employee of the debtor
-any person who is a creditor for the debtor, who performs “debt adjusting” at no cost to the debtor
-any person who makes a debt consolidation loan for the debtor, who in dispersing the proceeds of the loan performs “debt adjusting” at the authorization of the debtor
-any charitable organization that is a 501(c)(3) in the IRS code (basically non-profits) that is not in the business of “debt adjusting”
Learn more about debt consolidation and credit counseling in Kentucky here: http://www.lrc.ky.gov/krs/380%2D00/040.pdf (Warning: PDF)
More Resources
Filing Bankruptcy in Kentucky
Bankruptcy Laws in Kentucky
Debt Collection in Kentucky
People in Kentucky, like everywhere else in the country, are no strangers to credit card debt, and as a result, many of its residents find themselves searching for debt consolidation solutions and consumer credit counseling programs. The only problem is very few people even understand how debt consolidation works, let alone what to look for in a debt company. The purpose this page and PayingPaul.Com in general is help educated consumers about credit card debt management programs, as well as what to look for when choosing between different debt providers.
First, one must recognize that are actually two types of debt consolidation services: 1) credit counseling and 2) consumer debt settlement. Credit counseling services are usually offered by non profit debt help organizations, who among other things, can help you with budgeting and provide valuable financial information. If your situation permits, you may want to consider a debt management plan. These are services offered by credit counselors that involve working with credit card companies to lower your interest rates and restructure your debt. Plans last between four and five years on average before one is totally debt free.
It is important that before choosing this type of debt solution you consider all of the drawbacks. For one, because these services are offered by a non-profit, there is no guarantee that the services will be affordable or even legitimate. They do charge fees, and in recent years the IRS has uncovered that many operating in the space were dishonest about the type of services they offered to qualify for tax-exempt status.
Debt settlement, also known as debt negotiation, involves negotiating with credit card companies and collection agencies to obtain discounts off of your principal balance, sometimes by as much as 40-60%. This is a risky approach to getting out of debt because in order to qualify for these discounts one must fall behind on their payments. As the creditors go unpaid, the consumer saves money in a bank account until sufficient funds have built up to offer a settlement. Since the debt is unpaid as the funds accumulate, however, the creditors resume collections activities per usual. That means you may experience debt harassment, your credit score may be affected, and in some cases, a creditor may pursue legal action to collect the balance.
Although both programs can help people manage their debt, neither is an appropriate solution for all debtors. Credit counseling tends to be the best debt consolidation alternative for people who just need help with budgeting or a reduction in interest to make paying off the debt easier, whereas debt settlement is an ideal program for consumers who are in a financial hardship and whose debt problems are much more serious.
Want to speak with a debt consultant? Submit a form today!
Kentucky Debt Management Laws
In Kentucky, there are several regulations that debt management companies must follow in order to operate in compliance in the state. Much of the law deals with the fee limits that debt consolidation organizations, or “debt adjusters” as the statutes refer to them as, must abide by. The state defines “debt adjusting” as “doing business in debt adjusting, budget counseling, debt management, or debt pooling services, or holding oneself out, by words of similar import, as providing services to debtors in the management of their debts.”
Fees
The fee caps are set at the following limits:
-$75 for an initial set up
-$50 for a consultation
-the greater of 8.5% of the monthly amount paid by the debtor or $30 for a monthly maintenance fee
Exemptions
It should be noted that the following entities are exempt from the “debt adjusting” laws mentioned above:
-attorneys licensed in Kentucky
-anyone who is a regular full time employee of the debtor
-any person who is a creditor for the debtor, who performs “debt adjusting” at no cost to the debtor
-any person who makes a debt consolidation loan for the debtor, who in dispersing the proceeds of the loan performs “debt adjusting” at the authorization of the debtor
-any charitable organization that is a 501(c)(3) in the IRS code (basically non-profits) that is not in the business of “debt adjusting”
Learn more about debt consolidation and credit counseling in Kentucky here: http://www.lrc.ky.gov/krs/380%2D00/040.pdf (Warning: PDF)
More Resources
Filing Bankruptcy in Kentucky
Bankruptcy Laws in Kentucky
Debt Collection in Kentucky