Debt Resolution Programs

If a mountain of steadily growing debt leaves you struggling to pay your creditors, the right debt resolution program can help you lessen or eliminate your debts and get back on your feet financially. Depending on the program you choose, you will pay off your debts in full over time, convince your creditors to settle for less than you owe and obtain much-needed education tools that help you avoid falling victim to the same situation in the future.

Credit Counseling

All credit counseling programs differ, but reputable credit counselors evaluate your debts and assets and help you construct a workable budget. Credit counseling agencies also offer educational tools and workshops that assist you in understanding how you got into debt and preventing the situation from recurring.

A credit counseling organization provides you with a personalized debt management plan known as a DMP. Depending on the credit counseling agency, it may also contact your creditors and negotiate with them for lower balances, interest rates or fees in order to help you meet your debt resolution goals more quickly.

Debt Settlement

Debt settlement companies differ from credit counseling agencies in that the company's entire goal is to reduce the balances you owe by negotiating a settlement with each of your creditors. The Federal Trade Commission warns that although some debt settlement companies offer legitimate debt resolution programs for struggling consumers, others charge high fees without providing any guarantee of successful debt reduction.

Self-Regulation

You do not have to depend on a third party to negotiate your debts or compile an effective monthly budget for your household. Developing your own debt resolution program helps you avoid the fees charged by third-party agencies while successfully managing your monthly payments to creditors. You can attempt to negotiate balances and payment plans with your creditors on your own. If a creditor will not reduce the balance you owe, consider asking for smaller concessions such as a temporarily reduced interest rate or lower fees until you catch up on payments.

Bankruptcy

The ultimate debt resolution program, bankruptcy provides you with the court's assistance in resolving debts you cannot afford to pay. If you file for bankruptcy under Chapter 7, the bankruptcy trustee liquidates your assets and pays off outstanding debts. The court then discharges your liability for remaining debts that your liquidated assets do not cover.

Chapter 13 bankruptcy requires you to pay each creditor as much as you can afford each month for up to five years. The bankruptcy court reserves the right to modify the debt balance, interest or fees as it sees fit. If you cannot pay off the entire debt load within five years, the court discharges any debt that remains.