Understanding Debt Relief Options
For residents of Louisiana experiencing difficult financial hardship and searching for debt relief options to keep from going deeper and deeper in debt, there are a variety of debt relief programs to evaluate, in addition to personal bankruptcy. For many individuals and families in Louisiana who find themselves in over their heads with out of control debt, assistance may be needed to help manage, reduce, or payoff debts that have become debilitating. Troublesome unsecured debts can include credit cards and unsecured debts such as store cards, gas cards, medical bills, doctor bills and more.
The good news is, there are a variety of debt relief options that may allow you to lower your payments, reduce debts, save money, and get out of debt faster than if you didn't have the benefits of a structured debt relief plan working for you. These debt relief options typically include debt consolidation, debt management via credit counseling, or even debt settlement. For many individuals and families, these are all viable options that may be preferable than deciding to file for bankruptcy, which certainly can provide a fresh financial start, but is also considered the most serious of debt relief options that should be carefully considered before moving forward.
How Debt Management or Debt Consolidation Plans Work to Help Provide Relief for Individuals and Families
Debt consolidation, also known as a "debt management plan" or DMP, is normally coordinated with the help of a debt counselor or credit counselor. Debt consolidation typically can help to bring relief to consumers struggling with high interest debts across multiple credit cards – by combining or "consolidating" the debts into a one, more workable payment made each month to a credit counseling agency. The debt relief provider then has the task of distributing payments to each creditor who has agreed to extend the benefits of debt relief to the consumer.
How is a debt relief debt consolidation plan created? The objective of a debt management plan, arranged through a certified credit counselor is for the counselors, working on behalf of the consumer, to get a good understanding of the consumer's existing debts as well as the amount of money consumers can realistically afford each month to pay down their debts. Credit counselors, using this information, can then create debt relief proposals and contact creditors one by one requesting that the creditors agree to extend the benefits of debt relief to consumers who are experiencing a financial hardship. These benefits typically will include lower interest rates, a waiving of late fees and penalties, and even monthly payments they are more affordable for individuals and families going through difficult financial times.
The good news is, debt consolidation plans, or debt management plans designed by credit counselors who have the best interest of the consumer in mind, can be remarkably effective IF consumers STOP accumulating new credit card charges AND begin to systematically pay down existing debts month after month on a set schedule, and at lower interest rates. In this way, the process of debt resolution and paying off the principal amount of debt becomes quite predictable – and even exciting for consumers who are conditioned to spiraling debts being a sad fact of life! Again, while debt management plans do not make debts magically go away, they can be quite effective and save a large sum of money if followed faithfully. Overall, credit counseling programs or debt management plans are considered one of the most honorable ways for consumers in distress to get out of debt on a proven, set schedule, and adhere to their financial obligations as promised.
If you are considering debt consolidation or a debt management plan coordinated with the help of a credit or debt relief counselor, take a moment to find out how debt plans may be able to help you resolve debts faster. Get your free debt relief evaluation and savings estimate.
What Is Debt Settlement and How Does It Work?
For many consumers in Louisiana who are truly struggling to meet financial obligations or have very high balances on credit cards, a debt settlement plan or debt negotiation strategy may be a reasonable debt relief alternative to bankruptcy, because it may allow them to settle debts with creditors. While the objective of a debt consolidation or debt management plan (DMP) is to payoff the FULL amount of the credit card debt, just at a lower interest rate and via one consolidated monthly payment; the goal of debt settlement is to negotiate with creditors in hopes that they will agree to settle for a LESSER amount compared to what was originally owed. For many consumers who are faced with the prospect of bankruptcy, debt settlement or debt negotiation may, not only help save a substantial sum of money, but also be considered an honorable strategy to pay back a portion of the debts without defaulting entirely on their obligation.
Despite the fact that settlement can save a substantial sum of money, there are also drawbacks to this form of debt relief: Typically, when consumers enroll in a debt settlement program, credit scores will likely be impacted negatively because for consumers to "settle" debts, it typically involves "falling behind" on monthly credit card payments in order to redirect the funds to build up a settlement offer for a creditor. In addition, as consumers fall behind in making payments, creditors may threaten, or take, legal action because consumers are not living up to the terms of credit card agreements. Finally, it is important to understand that while debt settlement has become increasingly popular because it can help consumers settle debts for substantially less than was owed, the money saved through debt settlement is subject to federal taxes.
The question that begs asking is: Why would credit card companies ever be willing to settle with consumers for less than the full amount owed? For consumers in hardship who fall behind in payments by 60, 90 to 120 days or more, credit card companies may often choose to "sell off" what is considered "bad debt" to a third party debt collector for a fraction of the original amount, as little as 10 cents on the dollar -- so it's not surprising that creditors may be willing to accept a reasonable credit card settlement offer from consumers in distress, rather than recoup little or nothing if the debt is "sold off" or the consumer is going through such a financial hardship that they are forced to file for personal bankruptcy.
The good news for consumers is that even though debt settlement will typically have a negative impact on personal credit standing, it is not as serious or long lasting as a personal bankruptcy.
If you are struggling with credit cards and in need of debt relief, find out how debt relief could help you save money and resolve debts. Get your free debt relief evaluation and savings estimate.
Are You Faced With Financial Hardship and Need Relief?
While structured debt relief plans can help Louisiana residents during times of financial hardship, some people may also benefit from state-assisted programs and services to help them pay for utility bills, grocery bills, or childcare. State-sponsored services generally include programs such as the Louisiana Family Independence Temporary Assistance Program (FITAP), Louisiana Head Start, and the Supplemental Nutrition Program or SNAP, among others. To find out more, go to the state's homepage Benefits section.
It's important to recognize that debt relief programs – whether debt consolidation coordinated by a credit counselor, or debt settlement using the services of a debt negotiator – are all designed to help consumers who are truly experiencing a financial hardship. Debt relief programs are not intended for those who are financially fit and able but simply want to walk away from debts and ignore the terms of their original cardholder agreements. Just as personal bankruptcy has, in the past, been abused by some consumers on multiple occasions until the "bankruptcy means test" was put into effect to curtail this practice – there are financially capable consumers who choose to take advantage of debt relief programs that are designed to provide a lifeline for individuals and families going through a financial hardship. It also should be understood that, even for consumers who are financially capable and not going through hardship, there are basic self-help debt relief steps that can be taken to get debts under control -- such as avoiding impulse purchases, paying down high interest debts when at all possible, and practicing good budgeting and financial management.
If you are in need of relief from credit card debts, or other unsecured debts, take a moment to request your free debt relief evaluation and savings estimate today.