If you are struggling with high debt due to the high inflation rates, and are looking for debt relief options in the U.S. or in your specific state, you are at the right place. There are several options available to help you get back on track and help you eliminate debt once and for all. Depending on your situation, you can choose from a range of solutions, from professional services to government programs designed to ease your financial burden. Here’s a quick guide to the most common debt relief options available in America today:
1. Debt Settlement
Debt settlement is about negotiating with your creditors to pay off your debt for less than you owe. This can be done on your own, by calling each of your creditors, or through a debt settlement company who has experience doing this. Now, this might sound great, but it’s important to know it can affect your credit score and might have tax consequences. If you’re thinking about this option, make sure to read up on it on the Federal Trade Commission (FTC) website. We also recommend checking the FTC databse of companies that have been BANNED from offering any debt relief, which can be found at this link: https://www.ftc.gov/legal-library/browse/cases-proceedings/banned-debt-mortgage-relief-providers/list
2. Debt Consolidation
This option lets you combine all your debts into one single lower-interest loan. Be very careful with this option as you don’t want to get a loan that is high-interest, which will make your debt burden even worse. If the loan has a lower interest rate, debt consolidation simplifies things by giving you just one payment to worry about each month. Debt consolidation can be done through personal loans, credit cards, or even a home equity loan. However, it’s crucial to manage your finances carefully to avoid falling back into debt. You can learn more about it from the Consumer Financial Protection Bureau (CFPB).
3. Debt Management Plans (DMPs)
A Debt Management Plan is offered by nonprofit (and for-profit) credit counseling agencies. It helps you manage your debt by setting up a plan with lower interest rates and monthly payments. You make one monthly payment to the agency, and they pay your creditors for you. This option can take several years to complete, but it’s a structured way to tackle your debt. For more details, visit the National Foundation for Credit Counseling (NFCC).
4. Credit Counseling
This is a great first place to start for most people struggling with high debt. Credit counseling agencies provide you with free (or very low cost) advice on managing your finances, budgeting, and paying off debt. They can even assist with debt settlement and help you set up a Debt Management Plan (DMP) if needed, or just give you the tools to manage your debt on your own. For more on this, the U.S. Department of Justice provides a list of approved credit counseling agencies.
5. Bankruptcy
Bankruptcy is a legal process that can either wipe out or reorganize your debt. While the idea of eliminating most of your debt might sound appealing, this is a serious step that can have long-lasting effects on your credit, but it might be the best option if you’re in over your head. Chapter 7 bankruptcy can erase most of your debts, while Chapter 13 allows you to repay them over time. You can find more information from the U.S. Courts website.
6. Debt Forgiveness Programs
If you have federal student loans, you might qualify for a forgiveness program, especially if you work in public service. Programs like Public Service Loan Forgiveness (PSLF) can erase your remaining loan balance after you make 120 qualifying payments. Check out the Federal Student Aid website for more details.
7. Loan Modification Programs
Loan modification can help make your mortgage payments more affordable by changing the terms of your loan, such as lowering the interest rate or extending the payment period. This option can be a lifesaver if you’re struggling to keep up with payments. The Making Home Affordable program offers more information on this.
8. Tax Debt Relief
If you owe taxes, the IRS has programs to help, such as installment agreements or offers in compromise, which can settle your debt for less than you owe. You might also qualify for penalty abatement. For more information, visit the IRS website.
9. Student Loan Repayment Plans
Federal student loans offer several income-driven repayment plans that adjust your monthly payments based on your income and family size. After making payments for 20-25 years, any remaining balance might be forgiven. Learn more about these options on the Federal Student Aid website.
10. DIY Debt Repayment Strategies
If you prefer to handle your debt on your own, consider the debt snowball or debt avalanche methods. The snowball method involves paying off your smallest debts first, while the avalanche method tackles debts with the highest interest rates first. These strategies require discipline, but they can be very effective. The CFPB offers a helpful guide on these methods.
11. Legal Aid Services
If you have a low income, you might qualify for free or low-cost legal aid to help with debt-related issues, such as defending against creditor lawsuits, collection agencies, or understanding your bankruptcy options. Find out more at the Legal Services Corporation website.
12. Foreclosure Prevention Programs
If you’re at risk of losing your home, there are federal, state, and local programs that can help. These include loan modifications, forbearance, or refinancing options. The U.S. Department of Housing and Urban Development (HUD) offers resources to help prevent foreclosure
State-Specific Debt Relief Resources & Programs
Please pick your state from the list below to find the best debt relief programs and options near you:
- Alabama (Coming soon)
- Alaska (Coming soon)
- Arizona (Coming soon)
- Arkansas (Coming soon)
- California (Coming soon)
- Colorado (Coming soon)
- Connecticut (Coming soon)
- Delaware (Coming soon)
- Florida
- Georgia (Coming soon)
- Hawaii (Coming soon)
- Idaho (Coming soon)
- Illinois (Coming soon)
- Indiana (Coming soon)
- Iowa (Coming soon)
- Kansas (Coming soon)
- Kentucky (Coming soon)
- Louisiana (Coming soon)
- Maine (Coming soon)
- Maryland (Coming soon)
- Massachusetts (Coming soon)
- Michigan (Coming soon)
- Minnesota (Coming soon)
- Mississippi (Coming soon)
- Missouri (Coming soon)
- Montana (Coming soon)
- Nebraska (Coming soon)
- Nevada (Coming soon)
- New Hampshire (Coming soon)
- New Jersey (Coming soon)
- New Mexico (Coming soon)
- New York (Coming soon)
- North Carolina (Coming soon)
- North Dakota (Coming soon)
- Ohio (Coming soon)
- Oklahoma
- Oregon (Coming soon)
- Pennsylvania (Coming soon)
- Rhode Island (Coming soon)
- South Carolina (Coming soon)
- South Dakota (Coming soon)
- Tennessee (Coming soon)
- Texas (Coming soon)
- Utah (Coming soon)
- Vermont (Coming soon)
- Virginia (Coming soon)
- Washington (Coming soon)
- West Virginia (Coming soon)
- Wisconsin
- Wyoming (Coming soon)
Debt Relief FAQ
Q: What are the main debt relief options available in the US?
A: Common options include credit counseling, debt management plans, debt settlement, and bankruptcy. There are also other strategies like selling assets or doing a balance transfer to a lower-interest card.
Q: How do I choose the best debt relief option for my situation?
A: Consult a financial advisor or credit counselor for personalized advice. Don’t go at it alone! They will analyze your specific situation and offer the best solution.
Q: What is credit counseling, and how does it work?
A: Credit counseling agencies are usually non-profits that provide free or low-cost advice and can help you create a budget and negotiate with creditors.
Q: What is a debt management plan (DMP)?
A: A DMP involves creating a structured repayment schedule with a credit counseling agency. They can usually lower your debt and make you issue one monthly payment to them, and they will handle paying all your creditors, while you save time and money.
Q: How does debt settlement work?
A: Debt settlement companies negotiate with creditors to reduce the amount owed. They can usually remove interest and lower your debt significantly. However, it does come at a cost as it will negatively impact your credit score.
Q: What are the consequences of bankruptcy?
A: Bankruptcy can have significant long-term consequences, including damage to your credit score and potential restrictions on future credit. Don’t choose this option before speaking to a credit counselor and reviewing all your options first.
Q: Can I get help with my student loan debt?
A: Yes, there are specific programs and options available all over the US for student loan debt relief. President Biden also recently enacted a student loan forgiveness plan.
Q: How long does it take to get out of debt using these options?
A: The time varies depending on the option chosen and your specific circumstances.
Q: Will these options affect my credit score?
A: Most debt relief options will have a negative impact on your credit score in the short term. However, successful completion can improve your credit over time, so don’t look at it from a short term lens. Consider future benefits also.
Q: Can I still use my credit cards during the debt relief process?
A: It’s generally recommended to avoid using credit cards while in debt relief programs. To use a metaphor: you need to stop bleeding for the wound to heal.
We’d like to remind you that it is important to seek professional advice from a debt counselor or financial advisor to better understand your options and make informed decisions.
