While it's tempting to believe that federal, state and local governments provide grants or "free money" for debt relief, they do not. Simply put, the government does not give you money to pay your debts. However, there is real help available for borrowers who need it. Short of declaring bankruptcy, debtors must find a way to satisfy their obligations, either through negotiation, consolidation or settlement. How you take the medicine is up to you..
Contact a reputable debt counseling agency for advice. Several reputable agencies are available whose sole purpose is to provide consumers with legitimate debt help. Their fees are low and the initial consultation is free. Debt counselors can stop collection calls, lower debts by negotiating interest rates and payments, have late and over-the-limit fees waived and arrange for full repayment within five years. They also help settle your debts for a fraction of what you owe, if necessary. Most provide housing and bankruptcy counseling services as well.
Give the debt counselor your financial information. Provide creditor names, balances owed, minimum payments and interest rates -- estimates are OK. To participate in a budget counseling session, provide income and complete expense information.
Enroll in a debt management plan. Commonly called a "DMP," these plans allow you to repay your debts in full, while also reducing the payment burden significantly. Fees are regulated and vary by state, but are nominal -- the counselor is able to fully describe the fees to you. If a DMP isn't an affordable option, ask about debt settlement. Debt settlement severely damages your credit, and is only advised under extreme circumstances.
Ask about bankruptcy protection if the DMP and settlement options aren't available to you. Be advised that you'll need to meet specific debt and means qualifications tests. Consumers can file Chapter 7 "straight" or Chapter 13 "reorganization" bankruptcy. Bankruptcy will ruin your credit, but it is possible to recover. There are other ramifications to consider; for example, employment can be affected. Debt counselors often provide bankruptcy counseling, which consumers need in order to file.
Avoid companies that claim they can get you a free government grant for debt consolidation. These programs do not exist, no matter how legitimate a company may sound or look. The worst scammers will steal your identity with the personal information you provide. Only use a reputable counseling agency verifiable through the Better Business Bureau.
Things You'll Need
Debt counseling agency contact information
Lender contact information
Checking account information
Income information, such as pay stubs
- FTC.gov: Knee Deep in Debt
- FTC.gov: Settling Your Credit Card Debts
- FTC.gov: Before You File for Personal Bankruptcy
- FTC.gov: Fiscal Fitness: Choosing a Credit Counselor
- National Foundation for Credit Counseling: Credit Counseling
- Consolidated Credit: Credit Counseling Services
- Green Path: Credit Counseling