Unsecured debts are those accounts, such as credit cards, that don't have any collateral pledged as security for the loan. When your credit card debt becomes unmanageable, you might need the services of a debt-reduction company. Or you might want to work on reducing your debt on your own before it becomes too unwieldy.
Debt Relief Programs
There are a number of debt-relief organizations that will assist you with managing your debt. They can help you reorganize, reschedule, make payment arrangements, get late charges waived, interest amounts reduced and monthly payments lowered. These programs will generally consolidate your unsecured debt. Credible debt-relief companies work to set up a plan tailored specifically to your individual situation.
Credit Use
When you enroll in a debt-relief program, your creditors might not allow you to continue to use your credit cards, which can have an adverse affect on your credit report.
Balance Transfers
You often can pay off all of your credit card debt with a lower promotional rate by performing a balance transfer to a credit card that offers that option. You also will be able to reduce your debt faster because more of your payments will go toward principal instead of interest.
Settlement Offer
Another option is to call your creditors to see if you can negotiate a settlement offer. Once the account has been paid it will read as, "paid", or "paid settlement" on your credit report. Other creditors will know that you settled your debt which is an indication that you had financial problems. Creditors will be reluctant to extend you credit in the future.
Lower Rate
Contact your creditors about lower rates of interest on your unsecured debt. When you make payments more money will go toward the balance and help pay your accounts faster. Lower interest rates will help you save money by paying less in finance charges.
Taxes
When you settle your debt, some creditors will send you a form 1099-C, which is a cancellation of debt form. In some cases you will be required to report settled debt as taxable income when you file your income taxes. If you receive a 1099-C, contact your tax adviser or tax attorney to see what your options are.
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