With the economy slowing and prices rising, it’s no wonder that many Americans find themselves in need of debt relief. There are alternatives you may wish to consider as you figure out how to get back on a firmer financial footing.
A Word of Caution
Many who need debt relief are desperate—and scam artists know this. There are always plenty of dishonest people and organizations who will promise everything, take your money, and not deliver as promised. One way to eliminate many of these debt relief “vultures” is to look for the Better Business Bureau (“BBB”) logo on the website or other materials of any person or organization advertising debt relief. Another way is to ask lots of questions:
“Do you have letters from satisfied customers? Can I see them?”
“If I’m unsatisfied, how much of my fee will you refund?”
“How long have you been in business?”
“Are there any creditors that refuse to work with you?”
You can also get a lot of useful debt relief information by typing “debt relief scams” into your Internet search engine.
Debt Relief Option #1: Do It Yourself
Let’s talk about some of your choices in seeking debt relief. First, you should consider negotiating with your creditors yourself. In fact, the number one rule of debt relief, whether credit card debt or even IRS debt relief, is to communicate promptly and honestly with your creditors. This will help keep you off the “bad” list of collectors. Make a simple monthly budget—money in vs. money out—and share it with your creditors.
If you are honest about this, your creditors will see that it’s not a matter of you not wanting to pay—you can’t pay and still maintain adequate food, shelter, clothing, and transportation. Even creditors know you can’t pay them back if you don’t eat, have a place to live, or have clothes and a way to get to work. Most creditors will work with you to set up a plan to satisfy your debt and still maintain these necessary monthly obligations.
Debt Relief Option #2: Hire a Debt Settlement Firm
Some people just can’t face negotiating with creditors. If you’re in this category, you may wish to consider the debt settlement form of debt relief: you pay a company or individual—sometimes, an attorney who specializes in debt negotiation—to talk with your creditors on your behalf and settle your debt, sometimes for much less than the total amount originally owed. But be careful: some companies who advertise themselves as experts in debt settlement are just looking to collect your fees and not much else. Read the cautionary paragraph above, and ask lots of questions before you sign on the dotted line.
Debt Relief Option #3: Bankruptcy
This is the option most people are trying their best to avoid, and with good reason: bankruptcy, whether it is the “partial payback” version of Chapter 13, or the “liquidation” version of Chapter 7, leaves a multi-year black mark on your credit record. Not only that, but it can have negative career implications, in some cases.
However, if you’re faced with a lawsuit because of unsatisfied debt, bankruptcy may be your last resort to hold onto certain critical assets, like your home, your car, and your retirement accounts. If you’re considering bankruptcy, you must seek the advice of a local attorney who knows the bankruptcy laws. Don’t go into bankruptcy lightly: it is a form of debt relief—but only in the most dire circumstances.