Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

5 Ways to Find Debt Relief

Written by Erik Larson, Community Blogger | Dec 21, 2017 4:35 PM
Having debt is inevitable today. However, when your outgoing is more than your incoming, it can be a very stressful situation. The financial burden that comes along with being the breadwinner is frustrating. You must make sure your bills are paid on time and for the correct amount. It may be difficult balancing a good payment history and still having enough money set aside for emergencies. If you are drowning in debt, then here are five ways to find financial freedom. 

1. Bankruptcy

Bankruptcy is a consideration when debtors hit rock bottom. When your upside down on income and expenses, this may be a way out. There are two chapters that consumers typically file, chapter 7 and 13. In a chapter 7 bankruptcy, it's considered a complete liquidation. A person's entire debt load is erased. In chapter 13, there is still some disposable income that is used to repay the creditors, though, the repayment amount is pennies on the dollar. 

After taking the Means Test, a person will know if they can file a 7 or 13 bankruptcy. Some debts, like cars and homes, can be reaffirmed and you can keep the asset. The process is easy, and a discharged can be received in under six months. Bankruptcy can take care of most bills, but it won't erase child support debt, money owed to the IRS, or debts obtained fraudulently. 

2. Fix Everything Yourself

Because you have already shown that you are not good at managing your finances, the success of figuring things out on your own is not guaranteed. However, It's worth a try. To get out of debt, you must have a plan, and you must get your creditors on-board with this program. Call the creditors and tell them why you have fallen behind. Be prepared to show documentation too. They may also ask for proof that you will be able to pay your responsibilities should you be granted leniency. Credit card companies are usually easier to work with than those that have a secured debt. However, most creditors understand that time and chance happen to everyone, and people fall on hard times. 

3. Consumer Credit Counseling

Another option is consumer credit counseling. There are numerous consumer credit counseling agencies available. You can find them on the internet or locally. Once you contact these people, you will have about an hour to discuss your finances with them. Most of these agencies charge nothing for their services.

The counselor looks at your financial situation and makes recommendations. It's worth mentioning that you must go through this" class" before you can file bankruptcy too. The counselor will determine how much money you can pay each month, then they worth to reduce your bills so that you can afford them. You must give up all credit cards and are urged not to get any new debts. Unfortunately, nearly half of the people that sign up for these services never finish the program. 

4. Debt Settlement 

Settling debts has recently gained prominence. You hire a debt relief company to do the negotiations with your creditors for you. The objective is to get the creditor to agree to a lump sum payment and forgive the rest of the unpaid debt. While the negotiations are in progress, you don't have to pay the monthly bills. Instead, smaller payments go into a trust to pool the resources. The pre-planned amount must be feasible. Your credit score can be affected negatively, but it's better than filing bankruptcy as its dings are only temporary. 

5. Debt Consolidation Programs 

One of the most feasible options is to consolidate debt into one account. This allows you to eliminate the higher interest rate bills, achieve lower monthly payments, and you only have to make one payment. Consolidation works by going to a bank and getting a loan or using other sources. The equity in your home can be used to borrow against, which is taking out a second mortgage. 

Those who don't have a home may need to offer some collateral. You may end up owing more money in the long run than if you just paid your bills, due to interest. However, these arrangements have helped many people that were struggling to make their payments. 

Taking Control Of Your Finances 

There is no shame in debt. Things happen and bills get behind. The key is to catch them before they get too far along that they do permanent damage to your credit. These methods listed above can help you get things back on track.
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