Hiding your head in the sand is an option. However, it’s not an option we recommend and your financial situation will not improve if you choose to simply ignore and avoid your debts. Many people who choose this option see their debts increase (not to mention the fees and interest you pay). Compound that with a job loss or an unexpected bill and the situation will only get worse.
Bankruptcy is the most extreme form of debt relief. It is a legal process that allows the debtor (you) to offload outstanding debt (there are certain debts that are not covered). The main reason people choose this option is that it allows you to start over again financially. However, there are several negative aspects of bankruptcy. For instance, bankruptcy can follow you on your credit reports for up to 10 years. Since it stays on your credit report it can also keep you from obtaining a new mortgage for two to three years.
Debt consolidation is the process of rolling all of your existing debts into one loan with a reputable bank or mortgage company. You’re not totally debt free—but all of your debt is consolidated into one loan. This will typically lower your overall monthly payment and will help you focus on repaying the balance owed (principal). This process will eliminate collection calls and may reduce your interest rates. However, it could end up costing you more over time.
Debt assumption is when your financial obligation (debt) is transferred from one party to another. Again, it’s not going to get you debt free, but it can be a tool you can use to eliminate debt faster. When you do a debt assumption you pay off—and thus end— the original debt responsibility by shifting the payment commitment to a new debtor under a fresh contract with the same lender. The benefit of debt assumption is that it offsets your debt, helps protect against lawsuits, and restores your credit without the possibility of tax liability. As with any debt relief program, there are guidelines that must be followed, so not everyone will qualify for Debt Assumption.
Debt Validation is when you follow a process that requires the collection agency to prove the debt is valid and that they are legally attempting to collect it. It is not uncommon for collection agencies to not be able to prove a debt is valid after it gets disputed with a debt validation claim. There have been instances when even debts that have a large balance can easily get invalidated. With Debt Validation, credit restoration usually begins as soon as you enroll your unsecured debt accounts. It can be a long process and the payments can be reduced based on how many accounts are enrolled.
Debt settlement is when you negotiate a fixed payment amount (less than the balance you owe) and work out terms to pay the reduced amount. This is an option that many people use to ease their debt burden. We recommend using a settlement process that is backed or operated under the guidance and support of an attorney. The overall idea is that each debt is negotiated or “settled” with your permission and the money you have been saving is used to pay off the agreed to debt balance—requires you set up a savings account in advance.
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With resolute determination, MPowering America is here to reignite your dreams. Whomever you are, every culture, every background, we are here to help. Help starts with giving you a financial education to be set free from debt and to have financial freedom for you and your family, so that you can increase your income and accumulate wealth. This is all available to you if you are willing to learn.
If you stay focused on your dream, you can own your future.