Many Americans seek out debt relief options regardless of how much income they earn or how old they are. However, low-income individuals are likely to have a more difficult time paying off debt throughout their lifetimes because their earning thresholds are lower. Regardless, this does not mean that low-earning workers have no debt relief programs available to them. In fact, there are various programs that individuals can enroll in, depending on the type of debt they have accumulated.
From debt consolidation options to even filing bankruptcy, borrowers should be able to find debt reduction opportunities that work for them and their lifestyles. Despite the feelings of stress or anxiety that families may feel regarding their financial situations, it is never too late for individuals to take control of their finances. In addition to learning new budgeting techniques and more efficient ways of managing their incomes, credit-users can establish payment plans and similar strategies to manage whatever debt they have. Therefore, individuals who understand the best debt relief programs for their lifestyles can work to find financial peace and economic stability in their futures. You can take a look at a great article by TIME here.
Debt Relief Programs
There are various debt relief programs that individuals can enroll in as a way of gaining control of their economic situations. These resources can provide credit-users with different forms of support, depending on the assistance they need. First, individuals may consider enrolling in a credit counseling program. Consumers who utilize these services work with a professional to discuss money-saving strategies and implementable practices, including:
- How to create a practical budget that allows individuals to afford their basic living expenses each month.
- How to save for retirement and other potential life events, such as medical emergencies.
- Ways to cut back on monthly expenses and fees to save money.
- Tips for managing and reducing any debt that the individuals have already accumulated.
However, consumers need to be aware that not all debt relief companies are legitimate. Some individuals who masquerade as credit counselors actually have no accreditation that qualifies them to complete this type of work. Therefore, it is important that constituents be wary of these scams before they devote more of their time and energy into resources that cannot help them. To help find valid consumer credit counseling resources, individuals should know what types of questions to ask when searching for these resources. For example, firms should be willing to provide potential clients with free information that details their services and qualifications before they request any information about the prospective clients’ situations. Companies that do not do this are more likely to be fraudulent because they are unable or unwilling to explain their operations.
In some instances, individuals may also pursue a debt settlement option to help eliminate any unpaid amounts they owe to creditors. This option is particularly common for individuals who have credit card debt. With this solution, debt settlers contact credit agencies to try and negotiate a new total fee that borrowers would be responsible for paying. With these debt relief programs, consumers stop paying their payments and instead set aside money into a separate savings account. Then, the settlement company presents these amounts to the creditors in the hopes that they will accept these smaller payment amounts instead of what they are actually owed. This can hurt individuals’ credit scores, but it does eliminate certain types of remaining debt that individuals can pay off using this method. However, this type of program is generally unavailable for home or student loan debt. Learn more at the FTC’s website here.
What debt consolidation options are available to me?
Debt consolidation is another option for individuals who have unpaid balances remaining on different credit cards. Specifically, credit card debt consolidation requires consumers to take out a new credit card where they can transfer any payments they still owe from various credit cards. With all of these remaining on one card, it should be easier for borrowers to keep track of their payments each month so they do not fall behind. However, people who take advantage of this option must remember that there will still be a remaining balance on their new card, which they are required to pay.
In many cases, different debt consolidation companies and agencies permit individuals to transfer their remaining credit card balances at low-interest rates. However, these rates are usually only temporary, and rates will increase after the promotional periods end. Likewise, companies may also be able to raise the interest rates for individuals who are late on at least one payment. On the other hand, different credit unions and banks may offer a debt consolidation loan to consumers. Similar to consolidating debt via cards, this option requires people to put all of their remaining balances onto one loan and pay one amount each month. However, many of the same risks and potential financial pitfalls apply here as they do with the card consolidation option, so consumers must be wary. See what options are available at Consumer Finance here.
Debt Relief Payment Plans with the IRS
Sometimes, consumers may need to set up an IRS payment plan to make sure they are able to pay off any lingering tax-related debts they owe to the government. This is especially relevant for individuals who file their taxes and then realize they have large sums of unpaid taxes they need to pay. Instead of obligating individuals to pay these amounts at one time, the government allows debtors to set up an IRS tax payment plan. This arrangement permits consumers to work toward gradually obtaining tax debt relief. In any case, individuals who have unpaid taxes should consult with their IRS representatives to set up a payment plan. People who accumulate large quantities of unpaid taxes are at risk of having their passports revoked if they do not attempt to pay their taxes. Therefore, individuals should work on resolving these issues as soon as possible.
Should I be filing bankruptcy?
Consumers may consider filing bankruptcy if they feel as if they are running out of options when it comes to managing their personal debt. Often, individuals may consider filing for bankruptcy if they suddenly suffer from unemployment or if they accumulate massive medical debt. In any case, this is a solution that is most effective for individuals who have exhausted all other financial relief venues and see no other solutions for combating their debt.
Qualified bankruptcy lawyers can help consumers determine if this financial option would work for them. There are different types of bankruptcy that individuals can file, and these options determine how they can pay their remaining debts. Consulting with a legal professional can help individuals determine what type of bankruptcy debt relief they should apply for and how these solutions can impact their financial profiles and credit scores in the future. In any case, popular bankruptcy options include:
- Chapter Seven – This debt settlement option requires consumers to liquidate specific types of assets such as vacation homes and automobiles so they can pay off a portion of their remaining debt.
- Chapter 11 – Businesses usually take advantage of this option when they cannot maintain their overhead costs. With this form of bankruptcy, organizations do not need to liquidate their assets.
- Chapter 13 – This solution is available to individuals who are confident that they can pay off their remaining debt in three to five years. However, different aspects contribute to whether or not individuals can apply for this option, including how much debt they have and what type of debt they have accumulated.