Debt Relief Options

Choosing the Debt Relief Option for You

Whether you’re dealing with credit card debt, a mortgage that’s no longer affordable, medical debts, or any blend of these and other debts, you have options. Choosing the one that’s best for you requires a bit of research and an understanding about the pros and cons of each method.

What are your options if you’re struggling with debt and ready to take action?

Credit Counseling

Credit counseling is provided by nonprofit organizations free of charge and teach basic skills that help consumers reduce debt and create a budget. The goal is to sort through a person’s financial situation and help them come up with solutions. It requires follow-through from the consumer and ultimately, might not be enough to resolve the problem. However, it’s a good place to begin, especially since it’s require before you’re able to take more drastic measures.  If you are being sued, have judgments or other aggressive collectors after you, then credit counseling is likely not your solution.

Debt Management

Debt management makes it possible to reorganize or adjust debt. You’re still responsible for paying back the full amount you owe, but your monthly payments are reduced based on your personal circumstances. A debt management program requirements commitment to a payment plan – usually at least three to five years, and there’s typically fees associated with participation in the program.

It’s important you research any program in advance to making a commitment, because there are many out there that will do you more harm than good. Finding the right debt management program, though, can help you get your situation under control without needing to take more drastic measures.

Debt Consolidation

Debt consolidation allows you to use a new loan to pay off various other unsecured debts. The new loan is not unsecured, which means it’s a bigger risk, but it can also get your situation organized and under control. You’ll (ideally) pay less interest and have lower monthly payments, allowing you to finally move in the right direction concerning your debt. The downside is not everyone qualifies for a debt consolidation loan and the fees associated with these loans can be high. This is especially true if you choose to consolidate several debts onto a single credit card.

Again, it’s important to do your research and make sure you are making the best choice for you. Not all debt consolidation loans are going to make your situation better, but it is possible to use this strategy to your advantage.

Debt Settlement

Settling your debts means the creditor accepts payment from you for less than the total amount owed. Often, this is about 50 percent of the total.  It’s best to work with a debt settlement expert so you’re sure to get the best possible arrangement. It’s also important to understand the negative consequences, including the damage done to your credit and the tax implications.

Bankruptcy

Bankruptcy, often view by many as a last resort, can be the best way to make a fresh start if your credit problems are severe. Should you choose to file for bankruptcy, you’ll have the option of Chapter 7 or Chapter 13, depending on your circumstances.

In Chapter 7, your debts are discharged and you are no longer legally obligated to pay them. In Chapter 13, you commit to a payment plan that eventually eliminates your debts.

The benefit of bankruptcy is it can wipe out all or the majority of your debts and allow you to start from scratch. It ends the misery you currently face concerning creditors and can allow you to retain ownership of your home and other important assets. On the other hand, it damages your credit score and might not clear up all of your financial problems. For instance, some debts cannot be eliminated, which means you could still face serious financial challenges.

Which debt relief option is right for you and what you should do next can be complicated questions. If you’d like to discuss your situation with someone, we can help. Contact 1.800.220.4318 for more information.