Your Debt Relief Options

If you have personal finance issues you're in good company. This is the era of financial problems. The good news is that nearly any situation you find yourself in; job loss, medical bills, divorce, runaway spending - you have options. Some more attractive than others but you have them. A few of your options are:

  • Talking to creditors
  • Credit counseling
  • Bankruptcy

Talking to Creditors

Before you become delinquent on unsecured debt like credit cards, medical bills or student loans speak with your creditors one-by-one. You may be surprised at how willing they are to negotiate a payment plan or even a lump sum settlement. In this climate where more people than ever are defaulting on their debts it's in the interest of many creditors to cut their losses. When you call have an idea in mind of what the amount is you would be willing to settle on. Be cooperative and don't be afraid to ask them to forgive 50% or more of your debt. If you've already begun to miss payments they may be even more receptive to a settlement.

Credit Counseling

If you're not someone who feels confident enough to negotiate debt settlements on your own there are certified credit counselors that can help. Credit counselors work for not-for-profit agencies helping individuals get their personal finances in order through workshops, seminars and one-on-one counseling sessions. They will help you to create a budget and develop a strategy for getting out from under your debt that may include a debt management plan.

Debt Management Plans

A credit counselor can step in for you and speak directly with creditors on your behalf. They can often negotiate down your interest rates, lower your monthly payments or even negotiate a settlement on your balance. Once the negotiations are over you will make one monthly payments to the credit counselor who is now managing your debt and making payments to your creditors. There is often a relatively small monthly fee for the service. As part of the plan you'll be expected to make your new lower monthly payment in full and on time each month. With a new budget and a debt management plan you will hopefully have more money at the end of each month to start paying down the principle on your debt. Be sure to read any agreement you make with a credit counselor carefully and check them out with the Better Business Bureau before signing on.

Bankruptcy

It's very hard for many people to face but sometimes you reach the point when filing for bankruptcy is your best option. You may be familiar with the two main types: Chapter 7 and Chapter 11. Chapter 7 is often called straight bankruptcy and it involves a court appointed bankruptcy trustee selling off your non-exempt assets or turning them over to your creditors. Exempt assets may include things like work-related equipment or home furniture. The money from the sale of your assets is used to pay off creditors. Chapter 7 is the most common form of filing for individuals. Many people are able to erase their unsecured debts like credit cards and medical bills without having to liquidate any of their assets. Chapter 13 is designed for people who own a home and still have a relatively good income. It can allow you to maintain your home and other assets by entering you into a long rage payment plan on your debts.

Before filing for bankruptcy be sure to exhaust all of your other options. But if it turns out you decide to file you'll be in good company. ...look at GM.

Sources:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt015.shtm

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