Federal Debt-Relief Grants

Whether on the web, in the backs of magazines, or on late-night television, ads proliferate for "free government grant" debt-relief assistance. Unfortunately, 2011's difficult economy has caused many otherwise-savvy consumers to fall for these federal debt relief scams. While the federal government does provide mortgage debt assistance through the Making Home Affordable program, it doesn't provide relief from debts such as credit cards.

What Grants Do

While the federal government does spend millions of dollars every year on grants spending, the money is used to support legislation that improves the common good. For example, if you are researching and building inexpensive yet efficient solar panels, you may be eligible for a grant. However, the federal government doesn't consider your personal debt relief to be "common good." Health and Human Services, the department that administers grants, notes that "federal grants are not federal assistance or loans to individuals."

FTC Consumer Alert

State attorneys general have received so many complaints about federal debt relief scams that the Federal Trade Commission, the agency that protects consumers' rights, issued a strongly-worded alert. "Grant assistance" companies often operate businesslike websites, hire professional-sounding telephone personnel, and may even direct you to a legitimate grant -- for a fee. The worst companies will use your personal information to steal your identity. A real federal government grant application will never ask you for your financial account numbers or passwords.

Protecting Yourself

Don't give out your bank account, credit card or Social Security numbers to a grant "specialist" over the phone, through the mail or on the Internet. The government won't reach out to you to "award" you a grant, either. If you receive a phone call stating as such, it's a fake. If you've already given out personal data, check your credit reports immediately. Report false activity, and file a complaint with the attorney general and the FTC. Remember that legitimate federal grants never charge a fee for applying.

Legal Debt Relief

Great, you're thinking, now what? The good news is that you have options. Try using the "debt avalanche" to reduce your balances on your own by focusing on one debt and using the payment savings to pay off the next one more quickly, and so on. It's free, and it works. You also can try credit counseling; several top nonprofit agencies exist to help you get out of debt. The National Foundation for Credit Counseling has an excellent reputation. Although settling your debts causes your credit rating to plummet, it's another legal option. Bankruptcy -- the worst choice for your credit rating -- is another. Regardless of your approach, you can be debt-free without succumbing to a federal debt relief scam.