Helping Hands – 5 Options To Consider If You’re In Desperate Need Of Debt Relief

Helping Hands – 5 Options To Consider If You’re In Desperate Need Of Debt Relief

If you don’t have a steady income to support your basic expenses, it’ll be very difficult to pay off your debt. And while your financial health is important, having some quality of life is too. If you need help to get out of debt on a low income, here are five of the most effective solutions.  Helping hand – 5 options to consider if you’re in desperate need of debt relief.

1. Debt management program (DMP)

A DMP is a debt relief option that allows you to pay back the principal amount in full, but with your interest rates reduced or even eliminated. 

You only have one payment to make each month instead of several, and your credit score stays the same or may even improve while you’re on the program. 

2. Debt settlement program (DSP)

With this option, you don’t have to pay back everything you owe. Instead, a debt settlement specialist negotiates with your creditors with the goal of getting them to sign off on a settlement offer.

The creditors will agree to reduce your principal, so you only have to pay back a portion of the original amount. Once they agree to a debt settlement program, the creditors receive their money from what you set aside in a programmed savings account. 

When you complete your debt settlement program, you’ll enjoy freedom from debt. But it might take a few months to a few years to rebuild your credit score, depending on your unique circumstances. 

3. Debt mediation 

This is also known as debt negotiation or reduction. The goal of this debt solution is to convince your creditors or settlers that you are in a severe financial crisis. 

This puts you in a position to negotiate to pay only a portion of your debt. The debt mediation process works best when you’ve already fallen behind on your payments. 

For this option to work, you need cash on hand to offer your debt collector. Even if the amount is far smaller than what you owe, it should suffice to close your credit account. When your creditor receives this payment, the rest of the debt will be forgiven. 

4. Bankruptcy

There are two ways you can go from here. The first one is known as Chapter 7 or liquidation bankruptcy. The other is Chapter 13, or repayment bankruptcy. You’ll go through a “means test” to determine which one you qualify for. 

With Chapter 7, any non-exempt asset you own will be sold, and the proceeds will be divided between your creditors. Whatever isn’t covered by this will be discharged. Meanwhile, with Chapter 13, you’ll be subjected to a repayment plan where you only pay for a portion of the debts that you owe.

These options will get you out of debt, even if you’re jobless. But, they’ll also result in a lower credit score, which isn’t great, but it may be a small price to pay for debt freedom. 

5. Cut it out

Consider selling anything you don’t use. Maybe you have a regular payment for a vehicle you don’t really need. You can sell the car to save money or downsize to something cheaper. 

It’s better to cut your losses on something that’s costing you money without providing value than to drown in debt for the sake of maintaining status. 

In conclusion, you must be patient and maintain a positive attitude, regardless of the position you’re in. If you can, try and make token payments to your creditors while you negotiate a settlement. This will help you maintain good faith with them. Keep all communication with debt collectors in writing as this ensures you have evidence should you need it.