Debt Relief Options
Need a fresh financial start?
Are you having trouble paying your bills or receiving threatening phone calls from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?
You have always tried to pay your bills on time, but now find yourself in such financial difficulty that you cannot repay your debts. Whether your crisis was caused by personal or family illness, job loss or overspending, it can be frightening and overwhelming. There is relief in sight. You can rise above your current financial situation and rebuild your credit.
What should you do? Consider these debt relief options:
Do nothing
While ignoring your situation may offer temporary relief, it is not a realistic long-term solution. Even if you continue to make monthly payments and keep your good credit, your debt will continue to increase.
Borrow from assets or family to repay debt
Are you thinking about converting assets such as stocks, IRAs and 401k plans into cash to pay your debt? While this approach may preserve your good credit temporarily, converting an asset into cash can result in penalties and loss of income and should not be considered just to “solve the problem ”except in the rare situation. You may also thinking about borrowing from friends or family. Borrowing does not make the debt go away either; it simply transfers it from one creditor to another.
Consolidate your debt
One popular way is to consolidate debt is to transfer the balance from several credit cards to one with a lower interest rate. This transfers one unsecured debt to another with no tax benefits. Generally, you cannot borrow you way out of debt.
Seek credit counseling
For a fee, credit counseling services work with your creditors to lower the interest rate you pay on unsecured debt. Paying off your creditors in this manner typically take years. In addition, many credit-counseling companies are owned by credit card companies and do not primarily have your best interests in mind. Though the process may help you avoid bankruptcy, your credit will be severely impacted while in the program.
Negotiate your debt
With debt negotiation, you bargain with your creditors to lower your principal debt, significantly reducing your pay-off balances. Debt negotiation will compromise your credit in the short term, and you may have to pay taxes on the forgiven debt. However, for individuals or families in hardship, the benefits often outweigh the risks.
File for bankruptcy
Bankruptcy is a legal process through which people and businesses can obtain a fresh financial start when they are in such financial difficulty that they cannot repay their debts by eliminating all or a portion of existing debts and/or by stretching out monthly payments under the protection and supervision of a court.
Learn about the three types of bankruptcy
Chapter 7 Bankruptcy
Chapter 11 Bankruptcy
Chapter 13 Bankruptcy