By Kris McDowell
Although the holiday season is months behind us, that doesn’t mean that the possibility of increasing credit card balances is over. Maybe it’s a car repair, the need to replace an appliance or unexpected medical expenses. Sometimes things happen that are out of our control and if a credit card is used to cover the expense we can find ourselves with debt balances increasing.
If you’re searching for solutions to regain control of your finances, Amy Maliga, with Take Charge America, a nonprofit credit counseling and debt management agency, explains five options. Maliga says, “There is hope in the form of several viable options to begin getting back on solid financial footing. The challenging part is deciphering which option is the best for your unique situation.”
Credit Counseling
This free service provided by nonprofit agencies can help individuals discover available options for overcoming debt. Conducted either online or over the phone, you can receive a customized action plan to guide you toward the best debt relief solution for your situation.
Debt Management
A debt management plan is a relief solution available to eligible individuals who go through a credit counseling session. If you are eligible, it can help you save time and money when repaying debt. Benefits include lower monthly payments, reduced interest rates, waived fees and an end to collection calls.
Debt Consolidation
This is a process involving the combination of multiple debts into one new loan or line of credit with the aim of cutting down on the number of debts to pay and save on interest. You can consolidate most types of debt including credit card, student loans, auto loans and more.
Debt Settlement
Offered by for-profit companies, this service allows individuals to pay back only a portion of their total debt. This process often involves forgoing payments so the for-profit agency can negotiate a settlement amount. It’s important to be aware that this can negatively impact your credit score and you may need to pay taxes on any forgiven amounts.
Bankruptcy
A last-resort option, bankruptcy is a legal process that can help you repay or discharge debts under the protection of the federal bankruptcy court. There are two main types of bankruptcy–Chapter 7 (also known as liquidation) and Chapter 13 (also known as reorganization.
While bankruptcy can help you eliminate certain types of debts, including credit card debt, other debts (such as student loans or spousal support) cannot be discharged. Bankruptcy severely impacts your credit and ability to open new credit cards or obtain new loans.
For additional resources from Take Charge America, visit takechargeamerica.org.