When debt becomes a burden that you can’t handle on your own, some form of debt assistance might become necessary. Debt assistance can come from banks, legal aid or even from your creditors. Depending on the amount of debt you owe, the type of debt you have and who you owe, some options might be more beneficial than others. Here are a few debt assistance options you may have available to you and how they affect your debt.
Bankruptcy is commonly referred to as a last resort when it comes to seeking out debt assistance. This is mainly because of its effect on your credit report. Filing for bankruptcy can severely damage your credit for at least seven years. It might not be the best outcome for a form of debt assistance, but the tradeoff is the ability to potentially discharge your unsecured debts. This means your debts would be eliminated and you wouldn’t have a financial obligation to your creditor anymore. For those in dire straits, this might be the best form of debt assistance available.
If you have many debts that you cannot seem to keep track of, then debt consolidation might be the best method of debt assistance for you. Debt consolidation allows you to take out a loan to help pay off other outstanding obligations, leaving you (ideally) with one debt after all is said and done. This form of debt assistance is best for those who can pay off their debts, but have a hard time narrowing them down or have many different due dates and interest percentages to deal with. However, receiving a debt consolidation loan means that you would have to have a credit score to even qualify for one. Plus, you would also run the risk of further increasing your debt if you don’t alter your financial habits.
The main goal of credit counseling is to increase your knowledge about all things credit related. More specifically, credit counseling can help you identify problem areas in your financial habits so as to improve your behavior with money and decrease your debt. A credit counselor will be assigned to you to help understand and sort out your financial situation. If need be, the counselor may suggest a debt management plan to help alleviate a serious debt you own. While this only handles one debt, this is one of the few debt assistance options that doesn’t cost anything to start (so long as you use a nonprofit organization).
Settling your debts can help you save money, eliminate your debts quickly and stave off the negative effects of other forms of debt assistance. Debt settlement allows you to settle your debts for less than what you originally owed your credit provider (so long as you’re able to pay a lump sum at the time of the settlement). You can try to seek debt settlement by yourself, but you can also seek to settle your debts with the assistance of a debt settlement company. Debt settlement companies have debt specialists that have relationships with creditors that can help get your debts settled. Be aware that if you have any of your debt settled, you might have to report is as income to the IRS. Consult with your tax expert to be sure.