How to Get Debt Relief

Debt has become a major issue for many Americans, with more and more people struggling to keep up with their credit card bills. According to the Federal Reserve Bank of Philadelphia, the share of cardholders making only the minimum payment recently reached a 12-year high, and delinquency rates have been on the rise over the past year.

If you find yourself in a situation where you can barely afford your minimum payments each month, or worse, you’ve already fallen behind, debt relief may be a viable option to help you get your finances back on track. However, it’s important to note that debt relief is not suitable for everyone. Here’s what you need to know about debt relief, along with some alternatives if your debt is becoming overwhelming.

Debt relief companies, also known as debt settlement companies, can assist you in settling your outstanding debts for less than what you owe. While there is no guarantee that your creditors will accept a settlement offer, working with a professional can still be beneficial, according to Ashley F. Morgan, a bankruptcy attorney based in Virginia.

The process of debt relief typically involves several steps. Firstly, you would consult with a debt relief company to determine if you qualify for their services. You may be required to have several thousand dollars in debt, usually at least $7,500, although this amount can vary depending on the company.

If you decide to move forward with a debt relief program, the company may recommend that you stop paying your creditors, if you haven’t already done so. This step gives you leverage for negotiations with your creditors, but it also comes with risks, such as negative impacts on your credit score.

In addition, you would need to make deposits for settlement negotiations by setting aside money in a dedicated savings account. The debt relief company will help you determine how much you should be depositing, with the goal of saving approximately 20% of an enrolled debt account before negotiating a settlement with your creditor.

If negotiations are successful, the debt relief company will present you with a settlement offer, detailing the amount your creditor is willing to settle for and the fee the company will charge for the settlement. Once you approve a settlement, the agreed-upon amount will be drawn from your account.

Alternatively, if working with a debt relief company doesn’t seem like the right fit for you, there are other debt repayment strategies you can consider. These include reworking your budget to prioritize debt repayment, debt consolidation to lower interest charges, and working with a credit counselor to develop a repayment plan.

Ultimately, it’s important to explore all your options and choose the approach that best suits your financial situation and goals. Whether you opt for debt relief or one of the alternative strategies mentioned, taking steps to address your debt is a crucial step towards achieving financial stability.