You've likely seen the ads: seemingly legitimate spokespeople pushing "debt relief" at no cost to you, promising thousands of dollars of debt management funding, and all you have to do is pay $29.95 for a "list of free government grants that never have to be repaid." Beware: if it sounds too good to be true, it probably is. Government grants exist, but not for bailing out the average consumer's credit card debt.
The Reality of Debt Management "Grants"
Your first resource for checking the legitimacy of a grant is to head to the U.S. government's grants website, www.grants.gov. Here you'll find a list of all active federal grants, their applications, deadlines and uses. Note that there is never a fee to apply for a U.S. government grant, and all grants are publicly advertised. In addition, the U.S. government will never ask you for personal information, such as your social security number, credit card or bank account number.
As of March 2011, there are no federal grants available for consumer debt relief.
If you are a distressed homeowner, the Mortgage Relief Act of 2007 can help you modify your home loan. Apply through your lender, however -- not the U.S. government's grants website.
Nonprofit Agencies
There is help for those who seek debt relief. The National Foundation for Credit Counseling is the nation's longest running nonprofit and provides consumers with free budget consultations as well as debt management plans and housing counseling. Fees for participating in the Foundation's programs are minimal, and all counselors must pass a rigorous certification process. Counseling agencies that are certified by the NFCC are usually highly rated by the Better Business Bureau, and the website offers several educational tools and tips to help consumers get back on their feet.
Debt Management Plans
Call the NFCC and ask for a free consultation. At the end of the session, if you and the counselor decide you're eligible, you'll be enrolled in a Debt Management Plan. In a DMP, the counselor will reach out to your creditors and negotiate lower interest rates and fees on your behalf. You must agree to close the accounts, and your debts will be paid in full within five years. Be advised that a DMP is not a loan, and that participating in this program may affect your credit score. However, using a DMP is better than late payments, and the counselor may be able to restore your status to "on-time payments."
Debt Settlement
The NFCC may also be able to settle your credit card debts for a fraction of what you owe if you are willing to make a lump sum payment. Although credit card companies are loath to advertise it, debt settlement is completely legal. Note that your credit will be severely damaged, as creditors will only agree to settle if you're several months behind. However, if you can afford the settlement, you will be debt-free in a much shorter period of time.
Remember: there is no easy way out of debt -- only hard work and perseverance will get you back on track. Anyone selling a government grant for debt relief is selling something, and that's probably information that's already free on the web.
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