Debt Relief Options

While looking for debt relief options to help you solve your debt problems, the bad news is that there’s such an immense amount of info available, which can be very confusing.  However, the good news is that we have done the research to get you the info you want, help you understand the 5 major debt relief options and hopefully you will find the right solution for your needs.

Debt Counseling

Debt counseling is a service where consumers pay for advice on what to do with their current debt situation.  Debt counseling firms hire professional counselors, certified in debt counseling, to assist consumers find ways to repay their debt thru budgeting, financial education and money management. They provide tips on how to stay away from certain debt pitfalls, direct the client to debt educational material available on their websites, and recommend financial education classes in their area.

Debt Consolidation

Debt consolidation is a popular debt relief option for people struggling with debt.  Debt consolidation is when you take out a loan to cover your other loans and pay those off with this new loan. Then you make one monthly payment on one loan at a fixed rate. This may be a good option for people with good enough credit to get a loan at the size they need; however, going thru debt consolidation option can also have long-term negative effects on your credit.

Debt settlement

Debt settlement is not the best option for everyone. If you are already making your minimum payments on time and can continue to do so, then that is your best option. Debt settlement is done by debt settlement agency that negotiates with your creditors to lower the overall debt amount you owe and in return you have to pay the new amount as a lump sum. This can save you 50-60% up front plus the interest you don’t have to pay.

Although debt settlement will affect your credit report, it does have several advantages. You will save a significant amount of money as the whole point of debt negotiation is to lower your overall debt.

Doing Nothing

You might wonder what would happen if you do nothing? If you stop paying your unsecured debts, creditors do have the right to collect the debt from you. First of all, you will receive collection calls and letters from the creditor directly. After several months, if you are still unable to pay the debt, most likely, the creditor will refer your account to a third-party collection agency.

Third-party collectors are well-known for their aggression in their collection tactics. Therefore, do not be shocked, if the calls become pushy, or even threatening.

When all other collection efforts fail, a creditor will decide to file a lawsuit against the debtor. If one of your creditors sues you, the court will issue you a judgment in the creditor’s favor. Depending on your state’s laws concerning the enforcement of judgments, the creditor may be able to garnish your wages, charge your bank accounts, place a lien on your property or take other action to enforce its judgment

Filing for Bankruptcy

Although bankruptcy may resolve your debt problems, it is a very dissimilar form of debt relief, compared to the other debt relief options. A Chapter 7 bankruptcy is a liquidation of assets and liabilities, and it is typically considered the only remaining option. Ever since bankruptcy reform took into effect, it is much more difficult to qualify for Chapter 7 bankruptcy. In some cases, people are forced to file for Chapter 13 bankruptcy, where you repay a portion of your debts over around 3 to5 year period.  If you are considering bankruptcy, you should always consult with a qualified bankruptcy attorney in your area.

There you have the 5 main debt relief options.  Which option is right for you?