The state of economy has suddenly pushed people into obtaining debts just to keep up with their daily expenses. Unfortunately, the market still hasn’t recovered, making it harder for people to make ends meet while at the same time paying off their obligations to the bank. The good news is that there is something families can do when they find themselves at the end of the financial rope. For those who are having the same problem, following are some debt relief methods can be used by citizens.
Liquidation of Assets
Asset liquidation is the first step towards settling liabilities. Assets can be anything from the family car, yacht or even a timeshare. When assets are liquidated, they are basically sold and the resulting amount would be used to pay the obligation. For individuals whose assets are still more than their liabilities, this is the best and simplest way of resolving the problem.
The first and most common debt relief technique is by approaching a professional. A credit counselor would help debtors assess their financial situation and figure out a way to make their payments more budget-friendly. Typically, credit counselors would transact with creditors to create lower monthly payment plans, making it easier for debtors to pay. Note that with credit counseling, individuals would still be paying the same amount in all but would be doing so at a longer time frame.
In settlement of liabilities, individuals would still be paying their liability albeit in a much lower amount. Although this is ideal for debtors who cannot afford to pay their borrowings, it is important to note that this will have a huge impact on their credit rating. This type of debt consolidation is fairly aggressive and is best done through the help of a reputable provider.
Making Minimum Payments
One trick used by debtors is making minimum payments for their low-interest loans or credit cards. The goal is to pay off the high-interest liabilities first by paying off only the minimum payment needed for the low-interest ones. By doing this, debtors would be able to pay off the obligations that are eating up too much money in terms of interest.
Declaring Chapter 7 or 13 Bankruptcy
Declaring bankruptcy should be the last option for debtors considering the gravity of repercussions this move will make. Declaring bankruptcy may wipe out most of a person’s obligation, but it would also thoroughly ruin their credit rating. A move like this would show up in a person’s report for the next seven years, making it nearly impossible for them to obtain any type of loan.
Debt Relief – Which one is the Best?
Deciding between different debt relief solutions should be done after assessing the current financial situation of the debtor. To do this, individuals are advised to seek professional help to provide them with a more thorough break down of their current situation. From here, debt relief programs would be carried out according to the capacity of the debtor.