The Truth About Debt Relief Programs

Debt In The U.S.

Consumer debt is at an all time high reaching $13 trillion last year. Whether due to unemployment, illness or overspending more and more individuals have found themselves with large amounts of unpaid bills hanging over their heads.

What is Debt Relief?

The stress, panic and helpless feeling that accompanies debt can be an overwhelming burden. You may feel as though you have to plan your life around your debt and sacrifice other financial goals to try and keep up with monthly payments. Fortunately, it’s never too late to turn things around. With a well thought out plan relief is possible.

Debt relief is a broad term that you see all over the internet but what does it really mean? The truth is, it depends on the program. The commonality amongst debt solutions is that they focus on helping individuals rid themselves of money owed to others. Many of these programs can help you pay off your debt faster, make payments easier and/or more cost-effective.

What Are My Options?

With the great number of financial help options available, consumers can get easily confused and overwhelmed when deciding which service will best assist them. This article is designed to help you understand the various forms of debt relief so you can confidently choose the best solution for you. We will provide you with the key factors involved in the specific relief process to help you determine if it aligns with your financial goals. We recommend you do thorough research before committing to any of the below solutions.

To find the path most appropriate for your needs it's essential to thoroughly understand each relief program and define your specific financial goals.

  • Debt Settlement

    In a debt settlement, the consumer works with debt negotiation experts to settle their debt with lenders for less than the amount owed. To start, your financial situation is reviewed to see if you qualify for the settlement program. Once approved, they create a payment schedule tailored to your lifestyle and capabilities. At this point, you may be advised by the debt settlement company to stop paying your creditors in order to begin making fixed payments each month into an escrow-type account. This is done until you have saved an agreed upon lump sum of money. The debt negotiation expert then contacts the creditors to negotiate paying back your debts in fewer payments, for less than the total amount you owe. Ultimately, the debt is settled and creditors are paid with the money you have deposited into the account. The debt negotiation service charges a fee which is most likely deducted from your payment.

  • Debt Consolidation

    Another way to achieve debt relief is to get a debt consolidation loan. This option involves combining multiple debts into one single debt. This solution may lower your interest rate, which can help you save money on interest, reduce your total monthly payments and pay down debt faster. It’s imperative to ensure the consolidation loan has a lower interest rate and monthly payment than the combined cost of the bills you consolidated. Another benefit is that consumers find one payment less overwhelming and easier to manage. You can estimate your savings using a debt consolidation calculator. Unsecured debt can be consolidated with a personal loan. Some types of secured debt may not be able to be consolidated with a personal loan.

  • Bankruptcy

    Individuals in a challenging financial position may consider filing for bankruptcy as a means to get back on their feet. Normally considered a last resort, bankruptcy can be a smart financial decision in certain circumstances. That being said, it most certainly should not be entered into lightly. Chapter 7 bankruptcy is the most popular type. With a chapter 7 bankruptcy, virtually all your unsecured debts, such as credit card, personal loan, payday loans, cell phone bills, medical bills etc. are wiped out in a streamlined process without paying into a monthly repayment plan. In exchange, you agree that the lawyer handling your bankruptcy case can sell specific property deemed nonexempt property. The sales proceeds from this property is then given to the owed creditors. You will not be required to give up all your property. In fact, many filers can keep all of their property. This depends on a few factors including what state you reside in. The entire process takes about 3-6 months to complete and can cost approximately $350 to $500.

  • Student Loan Debt Relief/Forgiveness

    Did you know, there are federal student loan forgiveness programs as well as some state options? To obtain this type of assistance, you must meet very specific criteria. There are Public Service Loan Forgiveness and Teacher Loan Forgiveness programs. Eligibility is based on your types of employment. Although private student loans cannot be forgiven, federal student loans can be. If you do not meet the requirements for student loan forgiveness, you may want to consider your options to consolidate or refinance student loan at a lower rate or longer term.

  • IRS Tax Debt Relief

    Not paying your taxes on time can have severe penalties. The longer you wait to resolve your tax debt the most costly it will get. Just like any other lender the IRS is interested in collecting whatever they can from you. Working with a tax relief expert can help to reduce your tax liability significantly. There are many reputable firms with experience that can help you settle your bill with the IRS and save you the most money while resolving your IRS debt in the timeliest fashion. Typically, an attorney who specializes in tax debt relief will negotiate a settlement with the IRS and set up a payment plan for you to follow. If you are looking for professional help to resolve your tax issues, you can speak with a tax account executive to review your case and find the best solution for you.

  • Credit Repair

    If you are unable to manage your debts successfully it will have a negative effect on your credit score. Having a good score is extremely important for your financial stability. Often times it can be the deciding factor in getting a loan or not. It may also influence a potential employer’s hiring decision or landlord’s approval for potential renters. There are several simple programs that can help you to improve your credit scores. These companies will create a custom plan to successfully remove negative records from your credit report and improve your credit score. The credit repair company will work on verifying every detail on your credit report and have better negotiation skills to get you the best deals on repayment plans and other options to improve your credit. Working with banks, lenders and credit card companies on a daily basis, they can easily access documents you may find hard to find. These repair services help you to repair your credit faster than trying to do it independently.

Avoid Scams

There are many programs that misleadingly advertise and guarantee unrealistic, pain-free financial solutions. It is imperative you do your research, are clear about their services, and are knowledgeable about the fees they charge before agreeing to work with them. It is also crucial to understand the negative impacts each process will have and the length of time it will take to achieve your goals. All debt relief solutions have different benefits and drawbacks.

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