Millions of Americans live in debt - including a staggering 74 million people with credit card debt. If you're one of those with debt, you should understand the debt relief options that are available to you. These include credit counseling, debt consolidation, debt settlement, and bankruptcy.
What debt solutions are available?
Debt among Americans is alarmingly high – and it’s growing. Often, it’s because many individuals and families fail to assess the options available to them to resolve their debt. There are many different ways to manage your debt. Here are four debt solutions:
1. Credit Counseling Service
Working with a professional credit counseling service can be a great option for you to get a clear picture of what’s available to help you through your financial troubles. An experienced credit counselor can help you examine your credit history, assess your budget, review alternative options for debt relief, and suggest solutions for your specific situation.
2. Debt Consolidation Loan
A consolidation loan is a great debt relief option because it helps you get a single loan that combines all your unsecured debts and rolls them into a single monthly payment. With a debt consolidation loan, you can make your monthly payments more manageable and possibly reduce the amount you’re paying in interest each month on your current debt.
3. Debt Settlement
The debt settlement option allows you to negotiate with your creditors by reconciling a part of your debt. This means working with a debt settlement company that asks your lender to forgive a portion of what you owe. However, this option comes with a lot of risks. Debt settlement companies charge you fees that could ultimately cost you more than your original debt. In addition, using this option will have a negative impact on your credit score.
4. Filing for Bankruptcy
Filing for bankruptcy is commonly seen as a last resort for borrowers with large amounts of debt. The bankruptcy option gives you a chance to start over – but it often comes with certain restrictions. If you do decide to go through with a bankruptcy, you usually have two options: Chapter 7 or Chapter 13. Chapter 7 wipes out all your debts through a liquidation of your assets while Chapter 13 bankruptcy allows you to set up a three- to five-year repayment plan.
While Chapter 7 claims to wipe out your debts, not all debts are eligible for this type of bankruptcy. These debts include child support, student loans, and tax bills. Nonetheless, in most cases, filing for bankruptcy lets you start fresh, get rid of credit card debt, and rebuild your credit.
The downside? A bankruptcy could stay on your credit report for up to 10 years. It can also can be an expensive process, so be sure it’s the right move before getting the ball rolling.
Dealing with bad debt can feel stressful and overwhelming. However, not all debt is bad. In fact, having some debt can help you with such investments as getting a home, a college education, or starting a new business venture.
However, sometimes people fall into debt through irresponsible spending habits. Other times, people fall into debt because of emergencies that are out of their control - including unplanned medical bills, unemployment, or divorce. Debt solution providers can help.