What Is Debt Relief?
Debt can be like a heavy anchor that sinks individuals or families, but there is help for those most in need in the form of debt relief, in which some of the money owed is forgiven---or at least the growth of the debt is slowed. However, some debt relief programs should be avoided because of their unscrupulous practices.
The best first step is to find a certified consumer credit counselor, who can provide you with financial education and advice on budgets, credit and debt, debt management, bankruptcy, delinquent mortgages and home buying.
How Does Debt Relief Work?
It is possible to work with a counselor by telephone, email or in person. She can usually help you stop any legal action that a creditor is pursuing and develop a payment arrangement that satisfies everyone involved. The counselor can guide you through steps for managing your financial crisis and offer you financial education and planning so that you can better manage your finances in the future.
If you are dealing with severe debt, it is possible to enroll in a debt management plan, in which you systematically pay down your debt by making monthly deposits to your credit counseling agency. The agency, in turn, distributes your payments to your creditors. Typically it takes about 30 to 60 months for an individual to repay their debts through a debt management plan.
What Are the Pitfalls of Debt Relief?
Some debt relief programs falsely claim they can lower your interest rate or reduce your amount of debt, but you should proceed with caution, because you could end up carrying the same amount of debt along with added fees and penalties. Beware of companies that offer a one-time settlement for your debt or offer to reduce it by up to 50 to 70 percent, because these promises are just about impossible. If it sounds too good to be true, it probably is.
To be sure that you are getting a reputable credit counselor, consult the National Foundation for Credit Counseling. The NFCC, a nonprofit network of certified consumer credit counselors, can help you find a professional who can provide support for little or no charge. You can learn more about the NFCC at its website, nfcc.org.
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