When your mailbox is stuffed with overdue bills and your phone is ringing nonstop with debt collectors demanding payment, it can suck much of the joy out of life. Being buried in debt is hard. It’s scary and stressful. It may keep you up at night with worry. It may stress you out so much that you feel debilitated and try to ignore the issue so we have an overview of debt relief options.
But when you’re deep in debt the best thing you can do is face your problem head-on. A debt problem ignored will only get worse.
An Overview of Debt Relief Options
There are a number of debt relief options available. We encourage you to explore each one and choose the one that is feasible and best for you. Remember that a true debt relief solution addresses your entire debt problem, not just a portion of it. And the debt relief option best for you is reasonable and doable.
- Paying Off Your Debt
- Debt Settlement
- Debt Consolidation – Taking Out a Loan
- Debt Consolidation – Hiring a Debt Consolidation Company
Paying Off Your Debt
If you have adequate income and can stick to a budget tailored to quickly and reasonably paying off your debt, then this is an excellent solution to your debt problem. So long as you can reasonably afford to pay back your debt within three years, then paying it off is likely your best option. However, if paying off your debt means struggling to pay for living necessities like rent or food, paying high interest on debts for many years, and paying off debt in lieu of having an emergency savings fund―that is not reasonably paying off your debt and we encourage you to explore your other debt relief options.
Debt settlement is settling your debts for less than the full amount owed.
This option most often requires a large sum of cash. Typically a debt settlement requires that the agreed upon amount be paid in full within a few days or weeks. Consider too if this option will address the entirety of your debt problem. Settling one or two debts of many does not address your entire debt problem. Further, debt settlement comes with potential tax consequences because “forgiven debt” is considered income by the IRS.
Debt Consolidation – Taking Out A Loan
The loan is used to pay off creditors. Then one payment is due on the loan each month.
If you can get a loan with an interest rate more favorable than your current debts, you can afford the monthly payment, and you can pay the loan back in a reasonable amount of time, then a debt consolidation loan may be a viable solution to your debt problems.
However, this option comes with a host of things that can go wrong. We caution you to carefully consider if taking out a new loan is in your best financial interests.
Debt Consolidation – Hiring a Debt Consolidation Company
A debt consolidation company will collect a monthly fee from you and attempt to make settlement deals with your creditors. Generally, these companies are paid by taking a percentage of your monthly payment off the top. They keep the rest of the funds until there is enough in the pot to make a lump sum payment on a settlement deal, one creditor at a time.
Honestly, what we typically see at our firm is that people make their monthly payment to the debt consolidation company, but ultimately none or only a few of their smaller debts get settled. Leaving them out all of the money paid to the debt consolidation company, and ultimately filing for bankruptcy anyway.
Filing for Bankruptcy
Filing for bankruptcy is a legal right that helps people erase debts and/or repay their debts over time. Bankruptcy can erase credit card debt, medical bills, and other unsecured debts. It can give you true relief from your debts and the fresh financial start you need.
Also, when you file for bankruptcy, all collection action against you must stop. It is illegal for creditors to attempt to collect from you after you’ve filed for bankruptcy protection. This means collection calls stop, wage garnishments end, and lawsuits are halted.
Know that we are not in the business of talking people into bankruptcies they don’t need. We are in the business of helping people get out of debt and getting the fresh financial start they deserve. When you are deep in debt and considering solutions, you should explore all of your debt relief options. The best option for you and your family will depend on your specific situation.
The truth is bankruptcy is often the best debt relief option because the other options are simply not feasible or would take so many years to execute that they are economically damaging and would keep a person deep in debt for many years to come.
To further explore if bankruptcy is the right solution for you, read our articles:
- Debt Management vs. Bankruptcy
- Living With The Stress of Debt vs. Bankruptcy
- Do Not Borrow Against Your Retirement to Fund Debt Management
How Can Bankruptcy Help Me?
We’re committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation.
Find out more about being debt free in our guide: All About Debt Relief
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.