Debt Relief

You have several legal and financial routes to pursue. You have some legal protections as you try paying down debts. If you're worried and financially troubled by debt or student loans, have missed or late payments, and face repossession or foreclosure, learning about debt relief could be the right option.

The links below will help you learn about valuable topics or continue reading for an overview of debt relief.

Learning your rights under debt collection laws is a good idea. This can be tricky to navigate, and companies often try to exploit worried consumers facing debt.

Remember: No matter what your total debt is, you have rights against debt collector harassment as you work toward being debt-free.

Learn about additional topics below or by jumping to a specific section:

• What Is Debt Relief?
• Are There Any Programs for Debt Relief?
• Don't Know Where to Start? Review Your Finances First
• Making a Budget
• Deciding Which Debt to Pay Off First
• Debt Negotiation
• Learn More About Related Topics

Take the time to examine options and determine which might be the best fit for you.

What Is Debt Relief?

Debt relief is any structured plan to pay down your overall debt and get your personal finances under control. Many options can be undertaken yourself or with professional help. Debt relief options can include:

• Repayment plans or programs
• Debt Management Plans (DMP)
• Credit counseling services
• Creating and sticking to a budget
• Creating a personal plan to pay down debt
• Debt negotiations
• Refinancing debts, such as a mortgage or auto loan

Do your research before leaping into any possible solution.

Finding a Debt Relief Program

For those deep in debt, you might consider debt relief programs. One example is consumer credit counseling to:

• Educate yourself on debt
• Ask bigger-picture financial questions
• Learn to manage day-to-day cash flow challenges
• Learn how to negotiate with creditors

Some debt counseling organizations are nonprofits, but that doesn't guarantee they offer free, affordable, or legitimate services. Understand the agency's fees before signing any contracts. Debt relief companies cannot ask for payment prior to providing services.

Many credit counselors and debt consolidation agencies claim to help consumers reduce their debt. Be careful when choosing a program, as some are scams. Research your debt relief agency before making contact. The Better Business Bureau's website has reviews and a section for consumer complaints.

The DOJ provides a list of approved credit counseling agencies. You can also ask your local bank, credit union, bankruptcy, or consumer rights attorney for recommendations.

If you feel an agency is taking advantage of or scamming you, report them to your state attorney general's office, local consumer protection office, and the Federal Trade Commission.

Don't Know Where To Start? Review Your Finances First

Before picking a debt relief option, you'll need to know how much you can afford to pay toward your debt each month. Review your past expenses to determine how much you need to live. Check your credit report for an accurate picture of your debts and dispute any inaccuracies. It's a useful habit to check your credit report on a regular basis.

Leave enough for daily necessities like food and gas. Consider areas where you can cut back or save money. Once you have a realistic idea of your debt and expenses, you can determine exactly how much you can put toward them.

If you still need time to figure out how to use your debt payment money best, consider setting up a separate savings account to avoid spending it on other things.

Create a Realistic Budget

If you're working on cutting down your debt, making a budget is an essential first step. Creating and sticking to a budget is also an important way to avoid debt in the first place.

You can consider:

• Prioritizing your debts
• Reviewing your income vs. expenses
• Reducing and managing your expenses
• Avoiding excessive spending
• Refinancing your loans
• Planning for holidays on a budget

You can understand your finances and make good decisions by mapping out your regular expenses.

Consider Which Debt To Pay Off First

Paying down your debt is the first step toward controlling your finances.

A common question people ask themselves when they decide to tackle their debt is, "Where do I start?" Of course, every financial situation is different, making that question difficult to answer in simple terms.

Some possible ways to handle debt include:

• Knowing what kind of debt you're dealing with
• Figuring out what will give you the most significant boost, such as paying your highest-rate bad debt first or paying off smaller debts and building up to focusing on higher ones
• Consider the effect on your credit score

There are many ways to approach paying down your debt. FindLaw's article Which Debt to Pay Off First can help you determine what method might work best for you.

Personal or Professional Debt Relief Option: Debt Negotiation

You may be able to reduce the overall amount you owe by negotiating with your creditors. Your main goal should be to delay or minimize monthly payments until your finances improve.

Be aware that these kinds of delay tactics may provide temporary relief in the short term but increase the amount you pay in interest over the long term.

For credit card debt and other unsecured debt, there are two options:

• Negotiate with the lender to reduce the total amount you owe in exchange for a lump sum payment. Be sure to check with an accountant or attorney about the possible tax consequences of this action. This method is often called "debt settlement," and debt settlement companies can do it for you.
• Get a debt consolidation loan. This means you take out another loan, use the cash to pay off all your existing debts, and repay the consolidation loan over time. A consolidation loan often has a lower overall interest rate. Keeping track of one loan rather than several is easier.

You can do this research and negotiation yourself. Consider hiring an attorney or debt negotiation company if you feel out of your depth.

Is Bankruptcy Your Best Option?

An attorney can help you decide which options are right for you. If you qualify, bankruptcy is one legal option for dealing with financial problems and may offer a fresh start. Two main types of bankruptcy are available for individuals:

• Chapter 7 (liquidation bankruptcy)
• Chapter 13 (reorganization bankruptcy)

An attorney can review your situation and help you decide if Chapter 7 or Chapter 13 bankruptcy is your best option.

If your debt is not making everyday survival difficult and you have a steady income, you may want to consider debt relief before filing for bankruptcy. You must complete credit counseling before filing for bankruptcy, so this might be a useful starting point.

If your debt exceeds your ability to pay, you can discharge most debts in Chapter 7 bankruptcy. Chapter 7 is sometimes difficult to qualify for and the debtor must meet a means test concerning income level. If you qualify, you must give up your non-exempt assets to help pay your creditors, and your remaining debt is eligible for discharge.

Chapter 13 may be your best choice if you can manage some payments. Chapter 13 negotiates a settlement plan, organizing your qualifying debts into one payment. You pay your assigned bankruptcy trustee over three to five years. At the end of the settlement plan, the bankruptcy court will discharge your remaining debt.

Any bankruptcy will have a negative impact on your credit score. Bankruptcy remains on your credit report for seven to 10 years.

In general, bankruptcy law does not allow the discharge of your student loans, child support, alimony obligations, or income taxes. There are some procedures whereby student loans and income taxes can in some cases be discharged, but these are uncommon.

How a Bankruptcy Attorney Can Help With Debt Relief

Sometimes, despite your best efforts, you need professional help. You should talk to a professional if:

• You've been making your debt payments but see no improvement in your financial situation
• You can no longer pay your debts
• You're in danger of losing your home or facing a lawsuit

Feeling like you're drowning in debt can be stressful, but there are some ways to get relief.

If you have questions about paying off debt or need help filing for bankruptcy, you should consider speaking with a skilled bankruptcy attorney. A bankruptcy attorney can review your options and provide valuable legal advice on payment plans and bankruptcy filings.