The Federal Trade Commission recommends that people seeking relief from debt focus on credit counseling, realistic budgeting, debt consolidation or bankruptcy. However, only one of the options--bankruptcy--is akin to a government program for debt. The government does not offer bailouts for personal debt as of 2011. People struggling with excessive credit card or other debt must solve their problems on their own or ask for the government's help through bankruptcy.
Chapter 7 Bankruptcy
The filing fee for Chapter 7 bankruptcy is $299, as of 2011. Many people who feel overwhelmed by debt problems choose Chapter 7 because of its speed. Chapter 7 eliminates unsecured debt such as credit cards in a few months. That makes it the most efficient government-related option for resolving debt. The biggest drawback to Chapter 7 is its income eligibility requirement. Guidelines are established by the states, but usually only those with low incomes or unemployment for more than six months qualify. Most people hire an attorney to assist with filing for all forms of bankruptcy. The cost varies depending on the attorney but starts at several hundred dollars for simple cases.
Chapter 13 Bankruptcy
Chapter 13 requires a filing fee of $274 and is much more complicated than Chapter 7. Chapter 13 requires a payment plan of three to five years, with household spending tightly controlled by the bankruptcy court the entire time. Some people filing for Chapter 13 drop out of the program because of its length. Tight control over the debtor's spending is necessary to pay as much money as possible to creditors through the payment plan. That means participants in Chapter 13 give up the freedom to spend their money as they please--a challenge that some find too difficult.
Counseling
The government endorses some nonprofit credit counselors but does not directly offer debt counseling. The U.S. Department of Housing and Urban Development offers official certification for counselors who qualify as credit and housing specialists. Initial visits with counselors are free. The counselors can provide information on legal and ethical solutions for resolving debt, including frank discussions about bankruptcy and its effect on credit. Bankruptcy remains on your credit report for 10 years.
Debt Management
The Federal Trade Commission recommends debt management plans offered by counseling agencies. However, these plans also restrict household spending, with participants sending lump sum payments to the counseling agency each month for four or five years. The agency uses the lump sum payments to make individual payments to the participant's unsecured creditors. The counseling agencies claim they have the respect of credit card companies and other creditors, and as a result can negotiate affordable payment plans for debtors. Participation in debt management plans requires a monthly management fee for the agency.
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