Debt relief options are a great way to get rid of your debts and put your finances back on track. They can help you pay off your debts in a shorter amount of time, save money and avoid bankruptcy. However, it’s important to understand the different types of debt relief and which ones will be best for you.
Consolidation – A consolidation loan can combine all of your credit card and other debts into one new debt that will have a lower interest rate and a single monthly payment. This can help you to make more manageable payments and improve your credit score.
A Debt Management Program – These programs are run by nonprofit credit counseling agencies and they offer basic budgeting help for free. They also work to reduce your interest rates, fees and late penalties. They can also negotiate with your creditors to reduce your debts to a manageable level and help you to repay them in a 3-5 year time frame.
Settlement – These for-profit debt settlement companies can negotiate with your creditors to settle your outstanding debts, reducing the amounts you owe and often lowering your monthly payments. They will also collect a fee for their services, but the money they take can go a long way towards helping you to resolve your debts.
Bankruptcy – If you have a substantial income but find yourself drowning in debt, you might want to consider filing for bankruptcy. This is an option that should only be considered if you’re sure it’s the right choice for you, and it won’t erase tax owed, child support payments or student loan debt.
DROs – If you owe less than PS30,000, you may be able to apply for a Debt Relief Order (DRO). This will be issued by the official receiver and it will be added to the Individual Insolvency Register.
These orders are a last resort, but can be an effective solution for some people who need help dealing with their debts. The restrictions will usually last 12 months, but they can be extended if you have been careless in managing your debts or if you have a significant spare income.
The official receiver will then send you a ‘Debt Relief Restrictions Undertaking’, which you must agree to. This will prevent you from acquiring new debts, opening a new bank account or transferring the money you already have to another bank account for at least 12 months.
You can only file for a DRO under certain circumstances, which include being on low income or having a large family. If you don’t qualify, you can try to negotiate with your creditors on your own or use a debt relief company.
You should choose a debt relief company that’s reputable and a good match for you, because a settlement or a debt management plan can have a long-term impact on your credit report. Before hiring a debt settlement or debt management company, you should vet them through the Better Business Bureau to see if they have any complaints against them.