Understanding Debt Relief Programs

Understanding Debt Relief Programs

Debt Relief Programs come in many different shapes and sizes and some offer a compromise between both parties:  The creditor and the debtor, or person that’s carrying the debt, and that if you are reading this would probably be you. 

Bankruptcy 

The rules differ a bit depending on where you live and the particulars are different for every person as personal finance, tends to be personal. But how bankruptcy works is you have so few assets, and so much debt that it is in your best interest to start over. 

Bankruptcy is usually mandated through the goverment in some fashion and is handled by a  bankruptcy trustee or bankruptcy lawyer that you hired to help you with  the bankruptcy proceedings. 

Those looking to go bankrupt make a list of all their assets, and debts and all the assets are liquidated and whatever proceeds come from those assets get distributed to your creditors as the court sees fit. 

The good news about bankruptcy, is you get to keep some stuff. Mostly, your personal belongings and any tools for your job. You might be able to keep your car, depending on  it’s value. All states and provinces differ on what you can keep. It’s best to talk to a professional lawyer or bankruptcy trustee as you only want to consider bankruptcy when the debts far outweigh the assets you have. 

The bad news about bankruptcy is nobody will  give you credit for a while.  Rebuilding your credit can take time but it can be done. But if you depend to live on credit after bankruptcy, you better have a plan B. 

Debt Consolidation Loans. 

Debt Consolidation Loans allow you to borrow one big sum and usually from  one source so you can consolidate your debts, pay them off and then work on  paying off the debt consolidation loan. What I don’t like about debt consolidation loans is that there’s room for you to get into more trouble with your freshly paid off credit. It is quite possible that you could get back into fiscal trouble with a debt consolidation loan if you are not careful with your spending, and effectively doubling your debt  over time. Unless you change your spending habits,  it is just too easy to keep spending money you don’t have with Debt Consolidation Loans. 

But Debt Consolidation Loans can help, the payments can be spread out longer and the interest rates are usually lower than what is charged by some credit cards. But be careful with those loans and be sure you don’t rack up addition debt. 

Debt Negotiation

You have to be careful with this one as there are a lot of companies out there that would love to help you with your debt. For a fee. Usually how this works is  you pay some fee, you pay the negotiation company to arrange a better deal for you. The ads you see say you can get out of your debts and save 50 percent. I have a few problems with this as the companies are profiting on your debts, and you have to pay the company your ‘payments’. Who’s to say your payments are made on your debts? There are lots of  non profit organziations that offer the same service, but with no fee and give you clear advice with same result. If there is no way you can make your payments, but you could afford to make xxx a month for a certain term you may be able to negotiate a compromise. This is in both your and your creditors favor as at least they see half the money you owe and you usually pay a penalty with your credit score but the term in which your credit score will usually be less than other harsher options such as bankruptcy. 

Those 3 solutions all come with  a price. You got yourself into debt. Don’t blame others as it’s not going to do you any good anyway. There is one one fourth option that I failed to mention and that is this: Get out of Debt Yourself. Yes, it will be hard and there will be  sacrifices, but the reward is that you got out of debt on your own accord. There’s no better feeling, trust me.