Legal Debt Solutions

Legal debt solutions are available to consumers and businesses to help with debt. Consumers aren't always aware of the various debt solutions available. Often, it is possible to avoid bankruptcy or repossession by working with creditors, credit counselors or government agencies that help set up manageable payment plans. A credit counselor might be able to reduce finance charges and collection calls, as well as help debtors establish a budget that will permit them to pay down debts.

Credit Counseling Assistance

The front line of legal debt solutions usually involves a credit counselor. Credit counselors are financial professionals who work with you and your creditors to negotiate and resolve debt. Despite the claims of some, credit counselors cannot relieve you of legal debts or remove accurate negative information from a credit report. They can help you create a budget, develop strategies to repay debt and work with creditors to make monthly payments more manageable.

Debt Management Plans

In concert with creditors, credit counseling agencies sometimes develop a debt management plan as a path out of debt. Among other things, debt management plans help consolidate and simplify payments, lower finance charges and reduce collection calls. Debt management plans are usually arrangements where credit counselors collect monthly payments from you and distribute them to various creditors, reducing the risk you might miss a payment. It usually takes between three and five years to pay off debts completely with a debt management plan.

Foreclosure Assistance

Homeowners in financial hardship sometimes struggle to make their monthly home loan payments. If you fail to make mortgage payments on time, your lender begin to take action toward foreclosure. Under foreclosure, lenders can repossess a home and sell it to recover the homeowner's remaining mortgage debt. The federal government and state agencies provide counseling to struggling homeowners to help avoid this outcome. The government might be able to help modify the conditions of a home loan, reduce monthly payments or help you relocate without foreclosure. Homeowners should contact the Department of Housing and Urban Development (hud.gov) and the Home Affordable Modification Program (makinghomeaffordable.gov). Homeowners may also call a HUD-approved housing counselor through the HOPE hotline, at 1-888-995-HOPE. Housing counselors are able to connect homeowners with information about programs specific to their state as well.

Bankruptcies

While usually a solution of last resort, bankruptcy is sometimes the only way to escape a severe debt burden. Bankruptcy is a legal proceeding where the courts can liquidate the debtors' assets and cancel unrecoverable debt. Different kinds of bankruptcy have different rules. For example, under Chapter 7 bankruptcy, courts usually sell the consumer's property and render the proceeds to creditors to help pay down debts. Under Chapter 13 bankruptcy, courts develop a repayment plan proposed by the consumer based on their wages. Some debts, like child support payments and tax debts, cannot be resolved in bankruptcy.