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Up to your eyeballs in debt and looking for a way out? Programs designed to handle excessive personal debt tend to fall into four general categories. With the credit world evolving daily, due to new legislation and decreasing consumption, this is an ideal time to isolate yourself from the turmoil that's not likely to lessen anytime soon. Check out the debt elimination programs listed below to find the one that fits your circumstances. 1. Debt Settlement features a reduction of debt of up to 50% and repayment is usually short termtypically 12 to 36 months. The lower balance should allow for you to meet the monthly payments. Unfortunately, there is an immediate negative impact on both your credit score and your tax obligation. But if your credit score is already in the tank, this might be the way to go because it allows you to rebuild your credit quickly with consistent, on-time, payments. The IRS however, views the forgiven portion as income and, as such, taxable. 2. Debt Consolidation rolls many loans into one that is administered by a third party-a consolidation company of your choosing. The company negotiates with the various creditors for lower balances and rates. You make one payment to the consolidation company who, in turn, redistributes your payment to the many original creditors. This approach is less trouble for you, since the company does all the negotiating and paperwork. But it is important that you, the client, monitor them to insure payments are received by the creditors in a timely manner. 3. Chapter 13 Bankruptcy is to similar to debt settlement in that it renegotiates repayment conditions, but provides asset protection from collectors as long as regular payments are made over a three to five year period. 3. Chapter 7 Bankruptcy is by far the most extreme of the debt elimination programs available, but can provide total elimination of all unsecured debt (except student loans) within months. This allows the consumer to start rebuilding his credit rating much sooner. Qualification is based on income and assets. Non-exempt assets, if any, are sold by an appointed trustee with proceeds distributed to the creditors and the balance of the debt discharged. Which of these is the right way for you to go? Maybe a combination of these would work best. For example, you could negotiate directly with your creditor for better repayment terms and then take a second mortgage to pay off the lower balance. By combining debt consolidation and debt settlement you have one loan with a lower rate that is even tax deductible. Be creative, but choose a path that protects the assets you've worked so hard for and provides a decent lifestyle for you and your family.
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