Between student loans, medical bills and everything else in between, falling into debt is commonplace for many Americans. Although some debt can be paid off slowly but surely, there are times when there is an overwhelming amount and a person is stuck. Debt relief, other than bankruptcy, can assist in changing the terms and amount of debt, but may not be the best path for everyone.
It is first important to note that certain debt relief plans are not always an easy fix. You must understand the qualifications for the different debt relief options before choosing a specific plan. Debt management plans and debt settlement are two common debt relief options other than filing for bankruptcy.
Debt management plans allow you to pay off your unsecured debts, like credit cards, in full but with a lower interest rate or with fees waived. Each month, you make a payment to a credit counseling agency. The agency then distributes the payment amongst your creditors. Often, credit card companies and credit counseling agencies have agreements to help those following debt management plans. In many cases, your credit card accounts would be closed, and you would have no active cards until your payment plan is complete. When choosing an agency, be sure to pick an accredited one by either the National Foundation for Credit Counseling or the Financial Counseling Association of America. This will ensure whoever you work with will not be scamming you.
Debt settlement is an option for those who cannot qualify for bankruptcy but is not usually recommended. Through a debt settlement company, you would stop paying your creditors and place that money in an account they would control. As money accumulates in this account, your creditors are approached and would potentially accept a smaller lump-sum offer and not pursue you for the rest. As you can see, this option is extremely risky, as not paying these bills directly can result in collections calls, fees and even potential legal action.
When determining which debt relief plan may be right for you, it is important to work with a professional. They will help you understand the pros and cons of each option and choose the best plan for your unique situation.
The attorneys at Sadek and Cooper Law Offices have handled hundreds of divorces and bankruptcies in Philadelphia and the surrounding counties of Montgomery, Delaware, Bucks, and Chester. We are also licensed in the State of New Jersey. Contact us today to schedule your free consultation at 215-545-0008.