Debt Help

Do you need debt help, but are overwhelmed by the variety of debt management options available to you? The number of debt management companies available to help you overcome your debt load is staggering, and each company seems to offer distinct services from debt consolidation to debt negotiation to bankruptcy. Here is some information on different types of debt help generally offered by debt management companies.

Debt counseling
Debt help comes in a variety of forms, from advice on budgeting and spending practices to more radical measures such as debt consolidation and, in extreme cases, bankruptcy. However, a good way to determine what kind of debt help would benefit you most is to talk to a debt counselor about your financial situation and your debt help options.

Debt or credit counseling, as it is sometimes called, is a good debt help approach as it works to educate you in better financial practices, which could include setting up a budget, to reducing your spending habits to looking into getting a debt consolidation loan. One benefit to debt counseling is that it doesn't necessarily show up on your credit rating, so your creditors do not know that you have sought the help of an external source.

Debt consolidation
Debt consolidation is recommended for people with more serious financial woes. For example, let's say you have 3 credit cards, each with several thousand dollars worth of debt on them. If the minimum payment on each is $200 a month (roughly 2% of your total balance), you may have a difficult time making the payments each month, and you probably won't be able to make more than the minimum payment. In situations like this, debt consolidation is a good option for those looking for debt help.

Once your debts are consolidated, you only have to make one monthly payment, often less than your previous payments, and usually at a lower interest rate. It's important to know that if you choose to consolidate your debt, it will be evident on your credit report. However, this doesn't necessarily mean you have made your credit rating worse. In fact, it shows creditors that you have decided to be proactive with your debt, seeking debt help so that you can pay off your loans as quickly as possible. And, it's better to consolidate your debt than fall behind on your credit card payments, which will certainly make a mark on your credit rating.

Debt negotiation
Debt negotiation is a good form of debt help for those who have decided to consolidate their debts, but are very close to declaring bankruptcy. It is a more aggressive form of debt help. With debt negotiation, you hire a professional to speak to your creditors on your behalf in order to reduce the overall principal you owe. Depending on the amount of money you owe and the likelihood that you will be able to pay it all back, the creditors might agree to a reduction in the principal. On top of that, debt negotiators help to lower the interest you are paying to your creditors, so that your debt load can become manageable.

Bankruptcy
Bankruptcy is always a last case scenario. For example, someone who owes $60,000 in unsecured gambling debt and only brings in $1200 each month will have a very difficult time repaying their debt. In such situations, bankruptcy may be your only option, but it doesn't have to signal that you have failed.

There are 2 forms of bankruptcy available-Chapter 7 and Chapter 13. Chapter 13 is called consolidation bankruptcy, which in brief means that you slowly paying off your debt, a very different approach than Chapter 7 bankruptcy. It is referred to as 'straight bankruptcy,' and means that certain properties or assets you possess are not liable, so your creditors cannot seize them. Whatever has not been declared "off limits" is then sold and the proceeds are sent to the creditors to whom you are indebted. This often leaves creditors with little to nothing, which is why they prefer you seek debt help in the form of debt consolidation or debt negotiation.

Depending on the depth of your financial distress, there are several options available to you. A good start would be to talk to a professional about the debt help available to you before making a decision.