Debt Relief Options

Being in debt can be overwhelming. Fortunately, there are several different debt relief options for people who want to eliminate their debt. Here are a few options to consider.

Paying the Monthly Balance One way to get rid of certain kinds of debt is to pay down the monthly balance. Some people can do this with every credit card they own that they have a balance on. Others might need to pick one specific credit card to focus on at first.

This works because it requires people to be aware of how much debt they owe. That alone can influence people to make better decisions about their spending habits. It also helps avoid interest rate charges.

Debt Management Plans Nerdwallet https://www.nerdwallet.com/blog/finance/find-debt-relief/ states that a debt management plan allows a person to pay their unsecured debts in full, but often at a reduced rate of with fees waived. Typically, debt management plans focus on credit cards.

The person makes a single payment each month to a credit counseling agency. That agency distributes that money among the person's creditors. The person's credit cards will be closed until the person completes the debt management plan.

Nerdwallet points out that it is important to pick an agency that is accredited by the National Foundation for Credit Counseling or the Financial Counseling Association of America.

Bankruptcy The Federal Trade Commission https://www.consumer.ftc.gov/articles/0150-coping-debt states that personal bankruptcy may be an option. However, the consequences of filing for bankruptcy can be long-lasting. Bankruptcy information can stay on a credit report for 10 years and make it difficult to get credit, buy a home, get life insurance, and sometimes get a job.

There are two types of bankruptcy: Chapter 13 and Chapter 7. Each one must be filed in federal bankruptcy court. Filing fees are several hundred dollars.

Chapter 13 allows people with steady income to keep property, such as a mortgaged house or car, that they might otherwise lose in the bankruptcy process. Chapter 7 involves liquidating all assets that are not exempt (such as automobiles, work-related tools, and basic household furnishings).

Bankruptcy is not a quick and easy way to achieve debt relief. It is time consuming, could involve extra expenses, and may or may not work out as the debtor hoped it would.

Each of the "Big Three" credit reporting companies will have a slightly different way of coming up with your credit score. They should provide an explanation of how the score was derived and what it means.