Sometimes circumstances will align against us and what was an easily manageable situation gets out of hand. When that something is unmanageable debt, you’ll be glad to learn of these smart debt relief programs that really work. While each of them has consequences to consider, some are much less severe than others. It should also be noted these strategies will only work on unsecured debt like bank credit cards, retail charge accounts, medical bills and the like. Let’s start with the most benign.
Debt Consolidation
This strategy allows you to roll multiple debts into one, with a fixed monthly payment and (if you choose carefully) a lower interest rate. The term usually runs from two to five years. Here, the catch is your credit report must be rather clean to qualify. Review your financial situation carefully to be sure you can repay the loan before opting for this solution.
Debt Management
The next least damaging option will help you pay your accounts off in full, though usually at a lower interest rate and/or with fees waived. In this program, a credit counseling agency will pay your debtors each month from a fund you establish with the agency. Credit counselors are usually non-profit entities, so their fees are relatively low. You’ll also benefit from their relationships with creditors, which will save you the aggravation of trying to negotiate with them on your own. The catch here is your credit accounts will be closed and you can’t get them back until you’re in good standing again. You must also be very careful to avoid missing payments, as this can be considered grounds for kicking you out of the plan.
Debt Settlement
In this scenario, you stop paying your creditors altogether and instead deposit the money in an account with a settlement firm who will negotiate debt reductions on your behalf for all of the unsecured debt you’re carrying. Your credit score could take a significant hit because you’re no longer servicing your debts. However, you could ultimately pay less to resolve the situation. Here though, you have to be very careful. There are a number of unscrupulous players operating in this area.
Reputable plans, like the Freedom Debt program, will not ask you for fees up front. They will also have been in business for a long period of time and have affiliations and accreditations with industry watchdogs like the American Fair Credit Council (AFCC), the International Association of Professional Debt Arbitrators (IAPDA), and the Better Business Bureau (BBB).
Bankruptcy
Considered by many the point of no return, bankruptcy will clear most of your debts, but the trail it leaves can follow you forever. A bankruptcy protection filing stays on your credit report for 10 years. But even after that period has passed, you’ll run the risk of being indicted for committing fraud if a loan application or a job application asks if you’ve ever filed and you answer no. Your credit score takes a serious hit and the psychological ramifications can be pretty brutal too. Filing bankruptcy should be your last resort.
Depending upon your situation, all of the above can be considered smart debt relief options that really work. However, each comes with own set of drawbacks, so ultimately what makes one of them “smart” is how well it will works for what you need to accomplish.
