Understanding Debt Relief Options
For Arkansas residents who are going through a financial hardship and searching for debt relief options to keep from sliding deeper into debt, there are a several debt relief programs to consider, besides personal bankruptcy. It's a fact of life that many residents of Arkansas find themselves in over their heads and need assistance to help with managing, reducing or paying off debts from credit cards and unsecured debts like utilities, department store charges, or medical bills. The good news is, there are debt relief options or "solutions" that may allow you to lower your payments, reduce debts, save money, and get out of debt at an accelerated pace. Debt consolidation, debt management via credit counseling, and debt settlement are some of the typical debt relief options.
How Debt Management or Debt Consolidation Plans Work
A debt consolidation program, also known as a debt management program (DMP), is intended to combine or consolidate multiple high-interest consumer debts into one more affordable monthly payment. Using the benefits of debt relief, such as lower and more lenient interest rates and the waiving of late fees and penalties, a debt management plan coordinated by a debt counselor or credit counselor can provide personalized assistance for consumers who need a reliable, predictable and fast route out of debt.
Before starting any debt management plan, a certified debt counselor will typically interview consumers in order to get a clear understanding of their debts. Then they will conduct a budget analysis to find out how much money can be realistically set aside each month to pay down those debts. Finally, based on this information they will come up with a strategy (a debt management plan or DMP) and send proposals to each of the consumer's creditors requesting the benefits of debt relief on behalf of the individual or family experiencing financial hardship. These benefits can include lower interest rates, a waiving of late fees and penalties, and generally more favorable repayment terms. Those creditors who agree to the proposals are then added to the debt management plan. Consumers must still pay creditors according to the terms of their original agreements if they do not agree to the proposals.
The silver lining is, when new credit card charges stop piling up, and consumers begin to pay down debts monthly on a set schedule, and at lower interest rates, the debt resolution process and paying off the principal amount of debt becomes predictable – and even exciting for consumers who are used to spiraling debt being a part of life. While debt management plans do not make debts magically go away, they can be very effective and save a substantial amount of money if followed faithfully. In general, DMPs are an honorable way for consumers to live up to their financial obligations as promised and get out of debt on a more foreseeable path.
If you are considering debt consolidation or a debt management plan coordinated with the help of a credit or debt relief counselor, take a moment to find out how debt plans may be able to help you resolve debts faster. Get your free debt relief evaluation and savings estimate.
What Is Debt Settlement and How Does It Work?
Debt settlement or debt negotiation is a debt relief option that is more commonly utilized by individuals and families with high interest, high-balance credit card debt (typically $20,000 or more) and are thinking seriously about bankruptcy. It is a more aggressive form of debt relief that has helped consumers get out of credit card debt sooner than if they didn't enroll in a debt relief plan - if the consumer can place monies in a single account that can later be used to extend a settlement offer to creditors.
Keep in mind, however, that debt settlement is a form of debt relief that also has its drawbacks, even though there is the opportunity to save quite a bit of money. For example, when you enroll in a debt settlement program, your credit score will typically be impacted negatively because when you settle your debts, it usually involves "falling behind" on your monthly credit card payments in order to redirect the funds to build up a settlement offer for a creditor. In addition, as you fall behind in making payments, creditors may threaten, or take, legal action as you are not living up to the terms of your credit card agreements. Finally, know that the money saved through debt settlement, which is often a substantial amount, is subject to federal taxes.
If you are struggling with credit cards and in need of debt relief, find out how structured debt relief plans could help you save money and resolve debts faster. Get your free debt relief evaluation and savings estimate.
Why might credit card companies want to settle with consumers for less than the full amount owed? For consumers who fall behind in payments by 90 to 120 days or more, credit card companies may often "sell off" what is considered "bad debt" to a third party collector for as little as 10 cents on the dollar, so it is not surprising that creditors may be willing to accept a reasonable settlement offer from consumers rather than get little or nothing if the debt is "sold off" or the consumer is going through such a financial hardship that they file for personal bankruptcy. On the bright side, even though debt settlement will have a negative impact on credit, it is not as serious does not last as long as personal bankruptcy.
If you are in over your head with credit cards or other unsecured debts or going through a financial hardship and need to review your debt relief options, you can request a free debt relief evaluation and savings estimate today.
State Programs for Low-Income Individuals
While the state of Arkansas does not have debt grants or programs to help consumers pay off credit card debts, it does have several programs for low-income families and individuals who may need help paying bills, rent or buying groceries. Examples of these state programs include the Low Income Home Energy Assistance Program (LIHEAP), Medicaid, ARKids First! Program, which provides affordable health insurance for children, and a variety of food assistance programs. To learn more, visit the state of Arkansas' official Benefits page.
Are You Experiencing a Financial Hardship and Need Relief?
As you explore debt relief programs, it's worth noting that whether it's debt consolidation coordinated by a credit counselor, or debt settlement using the services of a debt negotiator, they are all designed to help consumers who are experiencing a financial hardship. Debt relief programs are not for individuals who are fiscally fit and able but simply want to walk away from debts and ignore the terms of their original cardholder agreements. Just as the option of personal bankruptcy was much overused until the "bankruptcy means test" was put into effect to end this practice, there are financially able consumers who would rather take advantage of debt relief programs that are designed to provide a safety net for financially distressed individuals and families.