Debt In The U.S.
Consumer debt reached an all-time high of $13 trillion last year. With unemployment, sickness, overspending, etc. more and more people have found themselves having large amounts of unpaid bills looming over them.
Debt Relief Explained
The helpless feelings of stress and panic that oftentimes come attached to debt can be an incredibly overwhelming situation. It may lead you to feel like you need to plan your life around your debt while being forced to sacrifice other financial goals just to ensure that your head stays above the water and you can keep up with the monthly payments. Fortunately, it’s never too late to change things, and with an intelligent plan of attack, relief is achievable.
Debt relief is a vague term that you see scattered all around the internet but what does it mean? The answer to that question depends on the program. One thing that they all have in common is that they focus on aiding individuals to eliminate money they owe to others or debt they have accrued themselves. A lot of these programs are designed to help you pay off your debt as quickly as possible while making the payments easier and friendlier on the bank account.
What Kind of Options Do I Have?
With so many options for financial help available, consumers can become easily overwhelmed and confused when trying to figure out which service works best for them. The goal of this article is to help you understand the different forms of debt relief programs that are out there so you can make smart and confident decisions regarding the solution that works best for you. We’ll provide you with the important factors that are involved with the specific relief process to help you understand if it adds up with your financial goals. As always, I want to stress how important it is for you to conduct thorough research before deciding on any of the below solutions.
To find the path that meets your needs it’s detrimental to fully understand each relief program and identify your specific financial goals.
Debt Settlement
In a debt settlement, the consumer works closely with expert debt negotiators to settle their outstanding debts with lenders for an amount that is less than what’s owed. First, your financial situation will be reviewed to verify whether or not you qualify for the settlement program. If you are approved, a payment schedule will be created and tailored to your lifestyle as well as your capabilities. At this point, the debt settlement company may advise you to stop paying your creditors and instead start making fixed payments each month into an escrow-type account. This will continue until you have saved a certain lump sum of cash that will be agreed upon prior. The debt negotiation expert will then reach out to the creditors to negotiate the repayment terms of your debts. This will be for less than the total amount you owe. In the end, the debt will be successfully settled and the creditors will be paid with the money you have deposited into the account. There will be a service charge by the debt negotiator a fee that is traditionally deducted directly from your payments.
Debt Consolidation
Another option for achieving debt relief is to procure yourself a debt consolidation loan. This option consists of combining multiple debts into one single debt. This is a great solution for lowering your interest rates on outstanding accounts, which not only saves you money but reduces your total monthly payments altogether. It’s detrimental to make sure the consolidation loans’ interest rate and monthly payment amount are lower than the combined cost of the bills that you’re aiming to consolidate. Another benefit of this option is that consumers find that one payment is much less overwhelming and far easier to manage than multiple ones. You can estimate the amount of savings you’d be looking at by using a debt consolidation calculator. Unsecured debt can be consolidated by using a personal loan while some types of secured debt may not.
Bankruptcy
It’s a tough spot to be in, but there may be a time when you need to consider filing for bankruptcy as a means to get things in order. Generally considered a last resort, bankruptcy can sometimes also be a smart financial decision in specific situations. With that being said, it’s not something you want to jump into without expert guidance from a bankruptcy lawyer. Chapter 7 bankruptcy is generally the most common type because virtually all unsecured debts, like credit cards, personal loans, payday loans, electric bills, phone bills, medical expenses, etc. are eliminated in one clean swoop without the need of paying into a monthly repayment plan. In return, you agree that the lawyer handling your bankruptcy case can sell certain properties of your own deemed nonexempt. The sales proceeds from this property are then given to the owed creditors. Of course, you won’t be required to turn over all your property and as it turns out, a lot of people who file can normally stay in possession of all of their property. This does however depend on a few variables including the state you live in. The whole process can take anywhere from 3-6 months to complete and can cost run the filer somewhere around $350 to $500.
Student Loan Debt Relief/Forgiveness
Not too many people know that there are federal student loan forgiveness programs as well as state options available as well. If you’re looking to obtain this level of assistance, you will be required to meet very specific requirements. There are Public Service Loan Forgiveness and Teacher Loan Forgiveness programs available and your eligibility for such programs is based on your type of employment. Even though private student loans can’t be forgiven, in the case of federal student loans, they can. If you fail to meet the requirements for student loan forgiveness, you should think about considering other options to consolidate or refinance at a lower rate or for a longer term.
IRS Tax Debt Relief
It’s not a good idea to fail to pay your taxes on time as you’re likely to run into severe penalties if you do. The longer you wait the most costly it will get. Just like any other lender, the goal of the IRS is to collect whatever they can from you. In this situation, consider working with a tax relief expert to help reduce your tax liability tenfold. There are a lot of reputable firms out there with a ton of experience in helping people settle their bills with the IRS while also saving them money at the same time. In most cases, an attorney who specializes in tax debt relief will negotiate some sort of agreement with the IRS and set up a payment tailored to your situation. If find yourself looking for professional help to get to the bottom of your tax issues, you can contact a tax account executive to look over your case and figure out the best options for you.
Credit Repair
If you can’t successfully manage your debts it will harm your credit score. Having a good score is not only important for your financial stability, it can also be the deciding factor on whether or not you qualify for certain loans. It may also influence a potential employer’s hiring decision or even a landlord’s approval if you’re looking to rent. Luckily, several simple programs are available that can help you to repair and improve your credit scores. These companies will create a plan that is unique to your situation to successfully eliminate negative records from your credit report, thus improving your overall credit score. The credit repair company will verify every detail on your credit report which provides them with better leverage of negotiation, allowing them to get you the best deals on repayment plans as well as other various options to improve your credit. Working with lenders, credit card companies, and banks every day gives them access to documents that wouldn’t be so easily attainable on your own. These repair services will not only help you to repair your credit faster, they’ll do it more efficiently than if you tried to take it on independently.
Watch Out For Scams
Unfortunately, there are a ton of programs out there that have misleading or unrealistic advertisements, normally boasting that they have pain-free financial solutions available. This is one of those times you need to conduct extensive research to keep yourself safe. Make sure you are knowledgeable about the fees they charge before you sign anything. All debt relief solutions have different perks and drawbacks, you need to find the options that suit your unique situation the best.