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Understanding the options and consequences of debt relief

On Behalf of | Sep 7, 2022 | Bankruptcy, Debt Relief

Being heavily in debt can take its toll on any California resident. Debt relief is a possible solution to the problem. However, you should understand your options and consequences when going this route.

Why you might consider debt relief

When you’re bogged down by huge debt, it can leave you overwhelmed. You might not see any way out for alleviating it and paying back your creditors. However, one strong option you have is to file for bankruptcy if the circumstances make it appropriate. If you can’t pay back your unsecured debts over a period of five years with strict budgeting or your total debt is half of your gross income or more, it’s your best bet.

If you could foreseeably pay back your debts over a five-year period, you might want to choose debt relief in the form of debt consolidation and a debt management plan.

Your options for debt relief

If you choose debt relief, a debt management plan could help you pay your unsecured debts. A plan is presented to your creditors. If they agree, you are able to pay back your debt in smaller monthly payments while interest rates and fees are forgiven.

Debt settlement is another option that could help you alleviate your debt. You work with a debt settlement company and make payments that are ultimately paid to your creditors in a smaller one lump sum amount. However, this method can negatively affect your credit score and taxes.

You may even be able to work with your creditors yourself to negotiate your debt down to a lower amount to be repaid. If you contact your creditors and discuss the situation and they are willing to compromise, this could be the best option for debt relief.

Debt relief doesn’t have to be out of your reach. These options might help.