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Many families around the country are experiencing financial difficulties and struggling to make ends meet.
For many more, unexpected events have left them with little or no income, and more debt than they can handle.
Whether overwhelming debt is the result of being laid off, medical bills, loss of a primary provider or failure to budget adequately; there are debt relief options available.
However, not all options are equal, and the decision to pursue one debt relief solution over another depends on your financial situation.
Each debt relief option has advantages and disadvantages, and knowing how they will affect your situation can help you make the best choice.
Direct Negotiations Many people do not realize that they may be able to directly negotiate a repayment plan with their creditor.
In many cases, a creditor is willing to grant a debtor extra time to repay a debt or reduce the amount owed on the debt.
Direct debt negotiations can be more time consuming and difficult if the debtor is unsure how to manage the process.
To initiate the process, simply contact your creditor and inform them of your financial situation.
They may request proof of your financial hardship as well as proof of your ability to repay the debts on a schedule.
A direct debt negotiation can save your credit and allow you to get caught up on your debts while removing the delinquent status from your account.
However, direct debt negotiations should only be pursued if you are certain you will be able to maintain the repayment schedule.
If you are unsure about your future financial stability, a direct debt negotiation may not be the best option for you.
Debt Settlement There are many debt settlement companies that offer to help debtors settle their debts for less than the amount that is owed.
Although settling debts with a creditor is possible, you should always be cautious when using third parties to negotiate your debts.
It is important to remember that the creditor holds all of the power when negotiating a reduced or "settled" repayment amount.
Only your creditor can approve a settlement agreement, and you should always get a written copy from your creditor directly about the terms of your agreement.
Debt settlements can help you absolve your debts by negotiating a significant reduction in the amount owed.
However, settlements tend to be reflected on your credit history and may damage your credit standing a bit.
You also risk having your assets seized during a settlement.
Creditors may want to liquidate some of your assets to help satisfy the debts, this is especially true for secured debts such a mortgages, car loans and payday loans.
Settlements are good for anyone that can afford to repay some of their debts, but may not have the financial means to repay it all or for long periods of time.
Bankruptcy Bankruptcy protection offers a unique approach to debt settlement.
In a Chapter 13 case, you will be allowed to repay your debts through a repayment plan while also protecting many of your assets from liquidation.
A Chapter 7 bankruptcy protects many of your assets while the court orders an elimination of your owed amounts.
Bankruptcy can offer long term protection against creditors and collection attempts.
It is true that bankruptcy may be listed on your credit report for up to 10 years, but that does not mean your credit history is permanently damaged.
In many cases, people saw an increase in the credit standing once their debts were absolved through bankruptcy and their accounts were brought out of delinquency status, as it allows for a clean slate.
Bankruptcy is usually a last resort option and reserved for those who have limited income and high unsecured debt balances.
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