Debt Relief Options
Finding an alternative to debt settlement is important when
you have at least one unsecured debt account that is still with
the original creditor. You simply have more attractive options
when you can still negotiate with the original creditor. These
are all alternatives to debt settlement.
Self-Guided Strategies
If you are earning more income or have reduced expenses and
are now able to send more money each month, then you might
consider getting back on track on your own. This involves
sending in amounts greater than the normal minimum payment plus
any fees so that both the balance and the subsequent "required
minimum payment" amounts are lower.
Eventually, you could get the accounts caught up on your own,
thereby eliminating late and over-the-limit fees while avoiding
a charge-off. This can be done if you successfully keep the
account from being turned over to collections. Charge-offs
normally occur once an account is 6 months delinquent, so make
sure you never fall that far behind.
Hardship
Some creditors offer hardship relief to debtors who have had
a temporary setback. This can include job loss or medical
emergency that interferes with your ability to keep up with
normal minimum payments. In order to qualify, you must prove
that the impact on your finances was substantial and that you
can expect to resume normal minimum payments within 6 months.
Hardship relief may include a temporary reduction in finance
charges and a temporary reduction in minimum payment.
Acceptances is solely up to each creditor's discretion. Gaining
hardship consideration is difficult when you have multiple
creditors as some may be more likely than others to grant your
request.
Debt Management Plan
A debt management plan is designed for debtors who could pay
off all of their unsecured debt within 3 to 5 years with the
help of lower payments and reduced interest. Many major credit
card companies sponsor these plans and provide benefits to help
you eliminate your debt. Benefits can include substantially
lower interest rates, a lower consolidated payment, re-aging of
your accounts to reflect current status and a waiver of late and
over-the-limit fees.
Some companies focus solely on debt management plans as a
means for eliminating debt. Others use it only as one of many
tools that are available. A reputable and effective organization
will provide credit and financial counseling to determine which
options are feasible for you. Expect your counselor to provide
information, not advice. It is up to you to determine what your
best option is.
Bankruptcy
If you cannot reasonably afford a debt management plan, then
perhaps bankruptcy would be your best choice. Bankruptcy is an
option to eliminate legal obligations for debt by providing
protection from creditors and arranging partial repayment.
Chapter 7 bankruptcy is often referred to as liquidation.
Your non-exempt assets could be sold in order to partially repay
your creditors. An income test may apply in order to qualify.
You may request a
Chapter 7 Resource Guide for more information.
Chapter 13 bankruptcy allows you to repay a portion of your
debt over a number of years through a court appointed trustee.
Known as reorganization, this can allow you to gradually pay off
a portion of your debt using future earnings.
Help with Options
If you are unsure which options are the most feasible for
your situation, consider contacting a reputable credit
counseling organization. The best credit counselors provide both
credit and financial counseling. Look for certification through
the Association for Financial Counseling and Planning Education
or through the Council on Accreditation.
Through a thorough financial analysis, you will be able to
see how your debt stacks up and how it affects your budget. This
financial analysis can include details on options, including
debt management plans, bankruptcy or self-guided strategies. See
how you could benefit from a
credit counseling session.
© 2004-2008 Vision Credit Education, Inc. All rights reserved.
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