Bankruptcy & Debt Relief
- Credit counseling is the first step to any debt relief. Find a credit counselor certified by the National Foundation for Credit Counseling. The counselor will go through your earnings and expenses and assist you in creating a plan to get rid of the debt. Credit counseling is not expensive and is required if you wish to eventually file for bankruptcy.
- Debt consolidation is another alternative for debt relief. It essentially allows a debtor to roll all of her personal debt into one large lump sum, then make payments on that lump sum. This can save a consumer money in the long run, but it's important to have a certified credit counselor review your plans for debt consolidation to make sure you'll actually save money with a consolidation and be able to regularly cover payments on your consolidation loan.
- While debt consolidation allows a debtor to roll all of their debt into one lump sum, debt settlement offers a creditor a lump sum in consideration for a complete discharge of the entire debt. This can be a useful tool for debt relief; however, it is usually effective only for unsecured debts such as credit cards or medical bills. Debt settlement offers can be made by an individual and do not require a debt settlement agency.
- Chapter 7 bankruptcy is possible if you make less than the state median income for your state. A Chapter 7 is essentially an estate liquidation wherein an assigned trustee sells off assets of your bankruptcy estate and uses the proceeds to pay off creditors. Once the liquidation is complete, the debtors are given a fresh start and all remaining debts are discharged.
- Chapter 13 bankruptcy is another bankruptcy option if you do not qualify to file for a Chapter 7 bankruptcy. Chapter 13 is a repayment plan that allows a debtor to make a set monthly (or biweekly) payment for three to five years. If a debtor succeeds in making timely payments for that time period, all remaining debts are discharged and the debtor again gets a fresh start with no remaining unsecured debts.