Debt relief programs allow you to partially or completely discharge many of your debts, including credit card bills. Whether you qualify for a private debt relief program or federal bankruptcy depends upon your income, assets and your debt load, according to the United States Bankruptcy Court. Also, not every type of debt can be reduced or eliminated in any type of debt relief program.
Credit Counseling
Credit counseling is the first step for any type of debt relief, including bankruptcy. To file personal bankruptcy, you must complete a government-approved credit counseling session, warns the Federal Trade Commission. Even if you do not wish to file bankruptcy, credit counseling can help you readjust your budget and find ways to get out of debt faster. Some agencies also offer financial education workshops.
Debt Management Plans and Debt Negotiation
If you have consistent income, you might qualify for a debt management plan, according to the Florida Attorney General. This allows you to repay your debts at lowered interest rates through an accredited financial counseling agency. Debt negotiation programs are riskier propositions, as settling your debts partially can damage your credit rating. They can work for people with upfront funds to invest in quickly getting out of debt, but require caution.
Chapter 7 Bankruptcy
People with serious financial problems can request elimination of many of their debts in Chapter 7 bankruptcy. Generally, a consumer must earn less than his state's annual median income figure to qualify for Chapter 7. As of 2011, the yearly median income level for a single California resident was $48,009, while a family of four in Massachusetts could bring in up to $102,110 a year, according to the U.S. Trustee Program. Chapter 7 damages credit ratings for 10 years from the date of filing. Some people may also forfeit assets like real estate equity to make up for their creditors' financial losses.
Chapter 11 and Chapter 13 Bankruptcy
People with regular income can partially repay business and personal debts under Chapter 11 or just personal debts under Chapter 13. Both types of bankruptcy help protect assets and usually take three to five years to complete. But during any partial bankruptcy, a consumer cannot legally get new credit without a bankruptcy judge's permission. Also, no type of partial or full bankruptcy reduces child support, alimony, recent tax bills, most federal student loans and debts related to the commission of a crime.
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