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Six Debt Relief Programs To Break Free Of A Financial Burden

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Conceptual hand writing showing Debt Relief. Concept meaning a reduction in the amount of debt that a country has to pay Alarm clock and torn cardboard on a wooden classic table backdrop

Debt can be a crushing burden, one that can take its toll on both our finances and our emotional wellbeing. Whether it’s student loan debt, medical bills or credit card interest rates, the stress of managing payments can seem overwhelming and demoralizing. But there is hope! There are a variety of federal and state debt relief programs designed to help individuals break free from their financial burdens. 

From income-driven repayment plans to debt consolidation, bankruptcy to tax relief initiatives – explore these six debt relief programs to see which could provide you with the assistance and guidance you need to regain control of your finances and start fresh. 

1) Credit Counseling Services

If you find yourself wondering ‘what is debt forgiveness program?’ we’re here to help. This is when a lender agrees to write off some or all of the debt owed by a borrower. And with professional help, you can get valuable advice on how to do just that, along with how to create and follow a budget, manage expenses, and work towards becoming financially independent again. 

They will also analyze your unique situation and recommend specific solutions that can help you pay off your debts and rebuild your credit score. By using these services, borrowers can gain a greater understanding of their financial situation and learn how to make better decisions in the future.

2) Income-Driven Repayment Plans

These plans, which are offered by the federal government, allow borrowers to make monthly payments based on their income and family size instead of the total amount that they owe. This helps lower students’ monthly payments and prevent them from defaulting on their loans by allowing them to pay only what they can afford. 

Additionally, these plans provide flexible payment options that allow for more manageable repayment terms. 

3) Debt Consolidation

This is one of the most popular debt relief options available today. It involves combining multiple loans or bills into one loan with a lower interest rate, thereby helping borrowers pay off their debts more quickly and easily. It also reduces the number of bills that need to be managed, making the whole process more efficient and less stressful. 

Moreover, debt consolidation can reduce interest rates, lessen monthly payments, or both.

4) Bankruptcy

Declaring bankruptcy is an option for individuals who are struggling with debt. It’s a powerful tool that can help eliminate some or all of their obligations, and can provide much-needed relief from financial worries. 

There are two types of bankruptcy available to individuals; Chapter 7 and Chapter 13. Chapter 7 allows people to wipe out most or all of their debts, while Chapter 13 requires them to make payments over three to five years under the supervision of the court. 

5) Student Loan Forgiveness Programs

Borrowers who have taken out student loans may qualify for loan forgiveness if they are employed in certain public service jobs or have made 120 on-time payments. This government program helps borrowers to become debt-free by forgiving a portion of their loan balance. 

It is important that borrowers understand the terms of the agreement before signing up for these programs as there can be tax implications and other costs associated with them. 

6) Tax Relief

Certain tax breaks such as the Earned Income Tax Credit (EITC) can help low-income workers reduce their overall tax burden, which in turn can help them pay off their debts faster. The EITC offers refunds to qualifying taxpayers, which can give them the financial boost they need to stay on top of their payments and get out of debt. 

Additionally, the Child Tax Credit can provide additional funds to those with dependent children, while deductions such as the Mortgage Interest Deduction or Student Loan Interest Deduction can help reduce taxable income by allowing borrowers to deduct certain expenses.  

By taking advantage of these tax breaks, struggling taxpayers can make significant strides towards becoming debt-free.

In Conclusion

At the end of the day, debt relief can be a powerful tool to help free you from financial bondage. As you explore the many options available to you, remember that no single solution fits all – research and weigh your options carefully so that you can choose the right plan for your needs. With patience and persistence, armed with knowledge about these eight debt relief programs, anyone can take back control of their finances and start fresh. 

So don’t let yourself get overwhelmed by debt – take action today! Your future self will thank you for it.

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Here Is What To Do If You Have Debt In Arrears

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debt-in-arrears

This article is a response to a reader’s question about paying off debt on an irregular income. They write:

Can you advise me how to manage to settle my absa loan & credit card because they are in arrears

At my work I earn with commission , sometimes I didn’t earn.

Here is my answer:

Being in debt is a challenge. It takes away money you could use for more productive things. It’s even more difficult when you’ve missed payments and your debt is now in collections. If that’s you, here are some tips to help you settle your debt that’s in arrears.

Pay down debt

Utilize some debt repayment strategies.

Debt snowball – pay your smallest balance first while making minimum payments to your other debts. When you pay off your smallest balance, move on to the next smallest balance. As you get rid of debts, you’ll be able to make larger payments to the following debt.

Debt avalanche – pay your highest interest rate first. Similar strategy as the “snowball”. Once your highest interest rate debt is eliminated, pay as much as you can towards the debt with the next highest interest rate.

Use retirement funds to pay off your debt. You’ll likely, depending on your age, pay a 10% tax penalty, however (if you’re under 59 1/2). Do you have any cash accumulated in a whole life insurance policy? Use that cash value to pay off your debts

Negotiate

How much, in terms of dollars, can you pay to your creditors as a settlement? Figure out what that number is before you start contacting creditors.

It may take a couple of phone calls, so don’t get discouraged. If you don’t like what you’re hearing from the representative you’re talking to, try and get a hold of a different one. Remember the dollar amount you can pay and don’t go over that amount. If you can pay 50% of what you owe, start with an offer to pay 30%. The creditor will counteroffer and hopefully, the agreed amount is 50% or lower.

Make sure you’re clearly communicating the financial hardship you’re experiencing that put you behind on your debts. Getting sympathy from a representative could help you! Get any settlement or repayment plan in writing as soon as possible.

Make sure you’re speaking to your creditors, not collections agencies. Collections agencies will take a settlement amount and sell whatever is left to another agency. Before you’ll know it, they’ll be after you again. Speak to the creditor you initially owed. Also, be prepared to pay taxes on the forgiven amount.

Bankruptcy

Nobody likes to think about it and it would be a very difficult decision, but it might be one to strongly consider if you want to settle your debt.

If you don’t have luck with negotiations, you might have to consider bankruptcy. There are generally two options – Chapter 7 and Chapter 13. Chapter 7 clears all of your debts. Chapter 13 is more of a reorganization.

Check credit reports

Clarify with the credit reporting agencies how things were settled. Clean up the report and it could help your score a little. Late payments and charge-offs stay on your credit report for 7 years. Debts in collections stay on your credit report for 180 days.

Debt settlement is about commitment. There are penalties if you miss ONE payment of your agreed-upon settlement, so don’t miss!

One more thing. Know your rights. There are several things collectors can’t do:

  • They can’t threaten you
  • They can’t shame you
  • They can’t force you to repay your debt
  • They can’t falsify their identity to trick you
  • They can’t harass you

It’s a tough road, but getting out of debt is paramount for your psyche and your financial success. Utilize strategies to pay down debt. Speak with your creditors about negotiating. If negotiation doesn’t work, consider bankruptcy. Once you settle your debt, review your credit report and dispute errors.

Related reading:

What you need to know about bankruptcy

Diving deep into debt

How to improve your finances on a low income

What to do about debt collectors

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

How to Fix Your Rotten “Get Out of Debt” Plan

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If my title intrigued you, I’ll assume your debt payoff strategy is in shambles.

I’m not surprised if it is. Many people struggle with debt:

  • The average person carries $7,800 in consumer debt.
  • 33% of this is revolving debt. The rest are loans.
  • $51 billion of fast food was charged to credit cards
  • Over 2 million households in the U.S. have more than $20k in credit card debt

It seems that many of us are in a never-ending spiral that we can’t escape.

Yet, successful businesses manage debt effectively every day.

Why is it that the same people who make these business decisions so effortlessly during the day come home and make emotionally fueled decisions at night?

That’s easy. They separate their working thoughts about money from their home life thoughts about money.

For some reason, when we reach home, we go from pragmatic individuals who can easily make objective, fact-based decisions for a company, to people who are emotional about their credit card debt and student loans.

I watched it happen for 16 years, but this behavior doesn’t make any sense!

You deserve success in your life. You deserve to have a debt payoff plan that actually works. All that you really need? Change the way you look at debt and your own financial picture.

Think of your own situation as if you were controlling a company.

Here are three crucial differences:

1) Companies manage interest rates and terms effectively, while most people don’t.

The average person says “I want a 15 year mortgage because my house will be paid off earlier than it will with a 30 year loan.” Really? Why is that? You can’t pay off the loan on a different schedule than the bank approves? Companies don’t begin negotiations by asking “when is the loan due” and then try to weasel the term to a shorter duration. Successful companies ask the bank for the longest, most flexible term available and then have their intelligent accountants create and maintain a repayment plan that works best for their goals.

Why do businesses do this? It makes financial sense to find a low interest rate and flexibility.

Why don’t we do it at home? We can’t trust ourselves to stick to the plan. We’ve messed it up so often in the past that we know we’re more likely to be successful if we have someone else do the thinking.

– How would you rearrange your debt if you focused on flexibility and interest rates?

2) Corporations focus on the big financial “game changer” moves while individuals worry about the latte factor and whether they should brown bag their lunch or eat at a restaurant.

Companies will focus time and attention toward negotiating salaries and health care costs to save millions of dollars. An employee stealing a few pencils and some toilet paper are a blip on the bottom line. Yet, the same people who focus on whether to raise the price of goods sold to increase profits $10 million will go home and waste all their time cutting a few coupons to save $4.73. What if they used this time to negotiate a raise or find better employment? That could mean $10k more to the bottom line instead of $4.73!

– What would happen if you focused your energy on major financial decisions instead of the line-by-line budget items?

3) A company makes decisions based on building financial muscle, not based on “feeling good.”

Companies weigh the financial impact of decision “A” against decision “B” and most often choose the more profitable path.

I’ve had clients who are vice presidents of major companies tell me, “I’m going to pay down a 3% loan before I tackle raising my 401k savings.” Why? “I hate having that hanging over me.”

While I appreciate the sentiment, I think this is where you modify the Nike slogan “Feel the fear and do it anyway” into “Feel the hanging over me feeling and do the right thing anyway.” It almost works.

  • Why do businesses analyze financial data and growth projections before making decisions? They have shareholders to hold them accountable.
  • Why don’t we make growth decisions more often at home? Would your financial picture be better if you thought of your family as shareholders? What would change about your focus?

Imagine a “shareholder” meeting to discuss what you’re doing well and where your “company” needs improvement

  • What charts would you show at this meeting? Would you produce information about your projected future? Are these accurate?
  • What changes could you make that you don’t make now if you had these?

If you were a shareholder for your company, what would you say about your stock? Going up? Struggling? Why?