It can happen to anyone. You’re working hard to save up money and pay down your bills. Suddenly, you’re swept up in a round of layoffs and lose your paycheck. Or perhaps you fall ill and miss work. Or maybe you total your car and don’t have comprehensive coverage. Next thing you know, you’re buried in debt.
Creditors are calling your phone day in and day out. Your credit score is plunging. And you don’t know if you’ll have the funds to pay your rent or mortgage. You’re not alone. U.S. consumer debt weighs in at nearly $14 trillion (yes, trillion with a ‘T’). And each year, hundreds of thousands of Americans declare bankruptcy, essentially admitting that they can’t repay loans, credit card debt, and more.
Fortunately, there are some options for financial debt relief. Many consumers are now turning to debt consolidation companies, debt relief organizations, and other financial relief programs. The government also offers a few select debt relief programs as well and there’s always the “nuclear option”: declaring bankruptcy.
What’s important is considering all of your options before seeking debt relief. Once you know what’s out there and what programs have a great reputation, you’ll be able to select a financial debt relief program that works for you.
Let’s take a look at some potential debt relief options and how they work.
National Debt Relief is a private company that offers debt settlement services. When you sign up for National Debt Relief, you’ll work with a certified debt specialist who will review your credit history, debt obligations, and more. Next, if National Debt Relief determines you’re eligible and could benefit from their program, they will help you negotiate with creditors.
Essentially, National Debt Relief will negotiate with your creditors and try to reduce your debt burden and perhaps even interest rates. National Debt Relief will also try to get late fees and other costs waived.
Your credit may take a hit during the process as you typically won’t be making payment. However, National Debt Relief claims that credit scores often return to their previous level or an even higher level by the time customers “graduate” from their program.
National Debt Relief is quite forward when discussing the drawbacks of their debt relief options. For example, some creditors won’t want to work with you to lower payments. In fact, financial debt relief programs are not favored by creditors, who would rather be paid in full. Debt relief is not a right.
Still, many creditors are willing to negotiate. On their past settlements page, National Debt Relief claims to have helped many customers reduce credit card debt. After settlement, many consumers ended up paying 50 percent or less on credit card debt. A few customers paid less than 15 percent of their original debt!
Accredited Debt Relief is one of the most highly regarded financial debt relief companies and has an excellent 5 star rating on Trustpilot. If you chose to work with Accredited Debt Relief, you’ll first set up a free consultation call. A Certified Debt Specialist will work with you to understand your situation and see if there is a solution.
If Accredited Debt Relief believes their debt relief programs will work for you, you’ll set up a savings account under your control. Next, you’ll make monthly deposits into the savings account. This money will eventually go towards settling your debt.
Accredited Debt Relief asks during this period that you stop using your credit cards. After all, you won’t be able to dig yourself out of debt if you keep racking up more debt. You’ll also communicate with your creditors and let them know what’s going on.
Next Debt Resolution Negotiators from Accredited Debt Relief will start working with your creditors. The goal is to reduce payments, settle for a lower amount, and ultimately boost your savings. If creditors agree to a settlement, you’ll need to approve it. The money in your savings account will then be used to settle the debt.
DMB Financial offers a similar program to Accredited Debt Relief. First, you’ll work with a certified Program Consultant to understand your credit score, debt obligations, income and more. The initial consultation is free. After the consultation, the Program Consultant will explain your financial debt relief options and potential outcomes.
Next, you’ll set up a savings account. You’ll deposit money into this account so that it can later be used to settle your debt. During this time, you may not be making payments to your creditor but instead depositing the money into your account.
Once enough money has built up, DMB Financial will reach out to your creditors and try to secure a settlement. DMB Financial will offer them a lesser amount than you owe, usually a fraction of the total amount you owe. It’s up to the creditor whether or not they’ll accept it but often you’ll end up paying less than your total balance.
DMB Financial has a long track record of success. The company claims that it has managed over $1 billion dollars of worth of debt and has helped over 30,000 customers reduce their burden.
You can see the outcomes of some of DMB Financial’s settlements on their results page. For example, in December 2019 DMB Financial helped one customer reduce debt from $11,370 to $2,274. Another customer saw debt reduced from $7,894 to $2,369.
New Era Debt Solutions will work with you to not just reduce interest rates but also your total balance. The company claims that you should be able to settle your debt in as little as two to three years. New Era Debt Solutions has identified two key factors for securing financial debt relief. First, you need an experienced negotiator on your side. Second, you need to build up enough capital to be able to offer a tempting settlement.
Like other debt relief options, you’ll first work with New Era representative to analyze your debt. This consultation is free and afterward, the representative can explain to you what your options and potential outcomes are.
Then you’ll set up a bank account and begin to deposit money into it. Once enough capital has been deposited into this savings account, New Era Debt Solutions will reach out to your lenders and see if they can reach settlement. Remember, creditors are under no obligation to accept a settlement. If a settlement is made, you’ll pay off your debt through your savings account.
Once you are enrolled in one of the debt relief programs, you will not be able to use credit cards from creditors you are negotiating with. It may be possible to have one credit card that is outside of the financial debt relief program, however.
CuraDebt bills itself as a full-service company and offers many debt relief programs. While the companies mentioned so far focus on reaching a settlement with your creditors, CuraDebt offers other services as well. Besides negotiating a lower settlement, CuraDebt also offers consolidation loans, tax debt relief options for both the IRS and state authorities, debt management, bankruptcy management, and more.
If you’re not sure what option is best and want to have a variety of choices, CuraDebt is a great choice. Before choosing which solution is best for you, you’ll undergo a free consultation with a CuraDebt representative, who will help you understand the many different options and which one is best for you.
CuraDebt’s standard debt relief program works like the others reviewed on this list. You’ll set up a special purpose savings account and deposit money in it on a monthly basis. Next, CuraDebt will work with your creditors to negotiate a settlement.
During this process, CuraDebt will also identify any violations on the part of collection agencies or your creditors. CuraDebt reports that in some cases they were able to secure five figure cash awards due to violations!
If you’re indebted to the IRS and other tax authorities, you’ll need to use one of the tax debt relief programs. Settling with the IRS is much different because the tax authorities have expanded collection powers. For example, the IRS could garnish your wages.
CuraDebt’s tax professionals can work with the IRS to reach an Offer-in-Compromise, in which you’ll pay less than the total owed. CuraDebt may also be able to help you form an installment agreement or find other solutions.
As mentioned, CuraDebt offers other services, including debt consolidation loans and debt management programs. Let’s look at providers who focus on these debt relief programs so you understand how they work.
Debt consolidation is one of the types of financial debt relief programs. Instead of negotiating a lower settlement with your creditors, you take all of your unsecured debt and consolidate it under one lender. Ideally, the interest rates will be lower and you’ll enjoy smaller monthly payments. This way, your debt levels won’t increase so rapidly and you can pay off your debts.
OneMain Debt Consolidation is viewed as one of the top debt consolidation companies and is also known for working with people who have low credit scores. If you qualify for a personal loan through OneMain Debt Consolidation, they will extend you a loan to pay off all of your debt. You will then repay your loan with OneMain Debt.
Whether or not this plan makes sense depends on the terms of your current debt and the terms offered by OneMain Debt. If you have $15,000 in outstanding credit card debt at 25 percent APR and OneMain Debt offers you a loan with a fixed APR of 18 percent, you could save a lot of money by consolidating your debt.
InCharge Debt Solutions is a non-profit organization that helps people get out of debt through their debt management programs. A non profit debt management program works similarly to a consolidated loan but interest rates are often lower and you consolidate your loan through a nonprofit credit counseling agency.
Essentially, you will take out a loan and pay off your current credit card and other unsecured debts. Next, you’ll repay the nonprofit lender. InCharge Debt Solutions reports that average interest rates are just 8 percent, compared to the 25 to 30 percent interest rates from creditors. In other words, you could save a huge amount.
In order to qualify for a nonprofit debt management program, you typically have to agree that you won’t use credit cards. With the lower interest rates in place you should be able to pay off your debts in three to five years.
You may also be asked to put together a household budget. Bad spending habits are often a root cause of debt, so you need to get your budget in order.
Let’s address the elephant in the debt relief room. Bankruptcy through the court system is probably the most well-known way to secure financial debt relief. Bankruptcy is a legal process through which individuals (and businesses) go to discharge debts that they cannot pay. A judge will either reduce or eliminate debt. In many cases, the person declaring bankruptcy must relinquish assets, such as automobiles, to lenders.
In order to declare bankruptcy you must file for bankruptcy with the Federal courts. State courts do not handle bankruptcy. Some people hire a lawyer while others file on their own. Before filing for bankruptcy, you must enroll in credit counseling with an approved provider. We’ll cover credit counseling at length in the next section.
After you have received credit counseling, you can officially file for bankruptcy with the Federal courts. You will have to present all of your debts, assets, income, and other financial data. Next, a judge will determine whether you can repay your debts.
If the judge determines that you are indeed incapable of paying your debts, they will then examine your debt and decide what to discharge and what you can afford to pay back. Many people declaring bankruptcy will hire a lawyer at this point to represent them.
If the judge determines that you are incapable of paying some or all of your debt, your petition will be accepted, and you’ll be referred to a trustee. This trustee will then set up a meeting between you and your creditors. You must attend this meeting. This is often referred to as a 341 meeting. You’ll have to answer a bunch of questions to verify that your documentation and everything is in order.
After that, your debts will be discharged. In some cases, you may be required to make payments to creditors or relinquish assets. Sometimes, a creditor will challenge your effort to discharge debts and you may have to have a hearing in front of a judge. Then new goal will be to recover from bankruptcy!
We mentioned credit counseling in the bankruptcy section of this article. Now, let’s take a moment to look at credit counseling as it’s another effective debt relief program. In some cases, credit counseling could help a debtor avoid bankruptcy.
Credit counseling is completed either online or over the phone. You’ll first gather all of your financial information, including who you owe, your income, and the like. It’s important to fully understand your financial situation.
Next, your credit counselor will work with you to identify alternatives to bankruptcy. In some cases, a credit counseling agency can work with you to negotiate lower payments. The counselor will reach out to lenders and see if there is a way to settle the debt outside of courts and other more extreme measures.
If your creditors reach an agreement, you’ll make payments according to the agreed upon plan and you will pay off a certain amount of debt.
If student loans are the biggest debt on your back, you should consider getting a job with the Federal government or another organization that qualifies for Public Service Loan Forgiveness Program. After you make 120 payments, many of your Federal Direct loans will qualify for forgiveness.
In order to be eligible you need to work for the American government at the Federal, State, or Local level. Tribal governments also qualify. Some non-profits are also included in the PSLF program. In order to qualify, the NGO must have tax exempt status as a 503(c) NGO and must be engaged in public service work.
Teachers who work in low income areas may qualify for the separate Teacher Loan Forgiveness Program. Teachers teaching most subjects will qualify for up to $5,000 in loan forgiveness. Mathematics and Special Education teachers may qualify for up to $17,500.
Keep in mind that this loan forgiveness program was authorized by Congress. In the future, Congress could change or eliminate these debt relief programs.
There you have it. We covered many but certainly not all of the debt relief programs available. If you’ve found yourself buried under crushing debt, you need to get it in control. Don’t delay! The longer you wait, the more debt will pile up and the harder it’ll be to dig your way out. Act quickly and you can start to rebuild your savings.
And always keep in mind that saving is the best way to make money. Opening a savings account could definitely be a good solution for you to start this new beginning. Having a look at this widget might be a good starting point:
Nwayita Perry is a personal finance writer who knows the value of getting the most out of her dollars. She understands that financial savvy is the key to making her budget stretch. She takes pride in sharing her financial planning and spending advice generously and prolifically. Her passion lies in helping millennials, as well as people of all ages and from all walks of life, develop rich habits they can use for life.
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