Get Out of Debt

Overwhelmed in Debt? Four Helpful Options

If you are in debt, then you can rest assured in knowing that you are not alone. According to the Federal Reserve, the credit card debt of American adults has exceeded $1 trillion. That massive number is nearly tripled by the amount of nonrevolving debt and loans circulating among American consumers ($2.84 trillion).

Chances are that your debt does not come anywhere near those trillion-dollar statistics, but you may still feel trapped in a financial hole without a rope to save you.

Here is an overview of helpful options that can lift you from out of that deep hole in one way or another:

You Can Handle the Load Yourself When in Debt

One option that you may consider is to dive into the debt hole yourself as a major DIY project and work on relieving yourself from that weighty financial burden. Since there are many ways to access your credit score and credit reports from all 3 bureaus each year, you can develop your own debt relief and management plan that will allow you to gradually pull yourself out of that pit.

If this is the route that you choose to take, it is highly recommended for you to do as much research as possible before you dive in and start making phone calls and payments. Why? It is vital for you to fully understand how the world of debt relief works. Otherwise, you may run the risk of biting off more than you can chew – which will only lead to the crumbling of your strategic plan and may even cause your debt snowball to grow even bigger than before.

Educate yourself on settlement and negotiation procedures, for instance, to understand exactly how you should communicate with creditors, collection agencies and other financial advisors that you will work with along the way. Doing so will make it much easier for you to develop a well-structured action plan in addition to learning how to assess its effectiveness as you go along.

File for Bankruptcy to See if You Qualify

If you are not able to make any payments on your debt or comply with a long-term payment arrangement, then presenting empty promises and agreements that will inevitably default is the wrong approach to take. In those extreme cases, you should honestly consider filing for bankruptcy to get assistance with clearing the slate in a lot of ways to get a fresh start. Before you make any final decisions or commitments with the bankruptcy option, it is highly recommended for you to schedule a consultation with an expert attorney in your area that specializes in bankruptcies.

A major advantage of filing for bankruptcy is that certain types (such as Chapter7 liquidation) allows you to erase most of your unsecured personal loans, credit card debt and medical expenses. On the other hand, the downside of bankruptcy is that it will essentially dissolve your credit score and remain on your report for an entire decade. It also prohibits you from filing another Chapter 7 bankruptcy for 8 years, which means that you will be on your own if those debts and expenses continue to pile up. Depending on your specific circumstances, you may not qualify for Chapter 7 but may benefit from filing for Chapter 13 bankruptcy instead. This is another reason why you should consult with an expert bankruptcy attorney when you are in debt to explore all your options and walk you through the various steps that must be taken to file for it. 


Consider a Debt Management Plan

If the task of handling your debt management as a DIY project seems a little too burdensome for you, then you should consider accepting an official debt management plan. This financial strategy focuses on providing you the ability to pay unsecure debts (credit cards) with either waived fees or reduced interest rates to lighten the load.

These management plans are typically hosted by credit counseling agencies that will then take your reduced payments and immediately distribute them among your creditors. A downside to this strategy is that you will no longer have access to any of your credit card accounts affected by it and studies have shown that closing credit accounts can have an adverse effect on your credit score and history. However, there are still quite a few advantages to the debt management plan option – especially since it removes the burden from your shoulders, allows you to benefit from professional assistance and is designed to gradually pull you out of that financial hole if you are in debt.

Sign Up for Debt Settlement, But Remain Cautious and Careful

Let’s say that you applied for bankruptcy and were hoping that it went through successfully – especially when you carefully considered the benefits and financial relief that would come along with it. However, for one reason or another, you did not qualify for bankruptcy and was essentially stuck between a rock and a hard place. As a last resort, you might want to consider accepting an offer from a debt settlement company.

In most cases, these types of companies promote the concept of you no longer needing to communicate with your creditors directly as a major selling point. Instead of sending money directly to the creditors, the debt settlement company will advise you to put your money into a special account that they control. The debt settlement company will then basically hold your money hostage from the creditors until they are able to work out a satisfactory negotiation to reduce the amount of debt owed. However, while this “negotiation” process proceeds over time, those penalty fees, late fees and possible legal expenses will still be accumulating behind the scenes. Most studies show that you will not even start receiving settlement offers until 5-6 months later.

A more effective approach to debt settlement (if that is your last resort) would be to handle it yourself without going through an actual debt settlement company. This basically connects back to the DIY option referenced above since you would be handling the weighty responsibility of contacting your creditors and working out potential settlement arrangements without a third-party expert to make those calls on your behalf.

Published by
Chad Van Horn

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