Do You Have Debt Relief Options?

Debt relief can be accomplished in a number of ways, some better than others. The basic methods include debt counseling, debt settlement and a do-it-yourself approach. The amount and types of debt determine the best option to resolve the indebtedness. Regardless what option you choose, you'll need to get organized. Start by gathering all your bills, statements and coupon books. Make a list of all your expenses, including the rent or mortgage, utilities, insurance for the house and car, gas and vehicle maintenance and anything else you can think of. The goal is to get control of your money and stop letting it control you. Add up your monthly expenses, both fixed (rent or mortgage) versus variable expenses (groceries, clothing). Compare the figure to your monthly income. If the two figures are close or if the expenses exceed the income, you may need outside help to get your debt under control and paid down.

If the income figure exceeds the expenses, you may be able to resolve your debt on your own. Dave Ramsey has an excellent program for getting out of debt. His book, "Financial Peace" details how you can communicate with creditors, have interest rates lowered and late fees stopped so that balances will decline each month as you make payments. This program is the best one for shoring up your credit rating and starting the rebuild right away. If you feel overwhelmed by the indebtedness, a debt counseling service may be what you need. A debt counselor, who is paid a commission, will provide you with the forms you need to create a workable budget as well as a complete list of indebtedness. The counselor then will do some calculations to determine if you can succeed in the program. You will sign a lengthy, detailed contract agreeing to allow the debt counseling service to draft a specified payment every month from your checking account. Those funds, minus the service fee, will be spread among your creditors. This kind of debt resolution takes at least three years and often, more.

Another way to get rid of debt is a settlement program. In a settlement, the creditor agrees to clear the debt for an amount less than what is owed. Depending on the amount and age of the debt, as much as 60 can be "forgiven." Here's how it works: you make a large payment to the settlement company to open up your "account." Then you make hefty monthly payments for as long as it takes to accumulate enough funds to offer various creditors a payoff amount. This means that you could be paying for three or five or even ten years before the debts are actually settled. And again, the impact to your credit rating is devastating. Being weighed down by debt affects every aspect of your life. So when make choices regarding debt relief, remember that you want the program to improve things, not make them worse. Do your research, get everything in writing and hold up your end of the deal.