There are several debt relief options for people to choose when under financial pressure. They range from simple advise towards better financial management right through to the dreaded bankruptcy courts.
There is a misconception that the only debt relief option open to those in financial difficulties is to begin bankruptcy procedures. There are actually a number of options to choose from, most of which are designed to never allow an individual to get to the bankruptcy stage.
The economic realities of recent times has meant that more people are now seeking relief from debt that will see them finally liberated from what is a hugely stressful situation. Cars, homes and livelihoods are at risk when debt mounts up, and lenders do not benefit when debts go unpaid, even if repossession takes place.
Therefore, lenders as well as support organizations have introduced a range of financial products and processes that are designed to help those in need of debt relief.
These packages can be divided into preventative and reactive debt management steps, and include such things as credit counseling, consolidation loans and debt settlement processes, with bankruptcy only a last resort.
There are three principal methods of debt prevention that are specifically designed to advise individuals on how to handle their situation better and attain relief from debt. These are better money management, credit counseling and the range of consolidations loans available. Obviously, each of these options are only useful when the risk of bankruptcy is distant.
Money management services provide debt relief advice that can see a bad financial situation turned around, or can ensure that a bad situation is never reached. The advice usually focuses on how to most effectively balance the income and expenditure. Sound management decreases the need for relief from debt because poor habits like overspending and overextending funds, are effectively countered.
Credit counseling is designed to correct the common misconception that credit cards and personal loans from financial institutions are little more than free money. Many people do not consider the consequences, struggle to meet repayments and fall into deep financial debt. It is then that debt relief becomes necessary, but financial experts and non profit organizations offer courses to handle such problems.
The third option is to seek loans to consolidate debt that is spread between a number of creditors. This type of debt relief effectively means getting a loan to clear existing debts, thereby creating just one creditor and a more manageable repayment schedule. This option provides relief from debt when the debt is on the verge of getting out of control.
Debt settlement comes into play after the third strike, so to speak, when creditors start rounding up on their debtors to get what is owed to them. As desperate as this might sound, it is important to understand that, as a debt relief option, it is designed to find agreement over a repayment schedule.
What this means is that relief from debt is attained through some compromise, with a schedule set up that does not cripple the debtor in terms of standard of living, but which restricts their ability to get finance. Typically credit cards are cancelled and loans are not available for a period of time.
The final debt relief option is bankruptcy, which is the last place anyone wants to find themselves in. The normal procedure will see a percentage of a debt recovered by selling the assets of the debtor, which means the house, car, personal investment portfolios and any other asset can be sold or liquidated.
Unfortunately, it can leave a debtor with practically nothing which is why it is so desirable to avoid this stage. Unfortunately, it is an option that thousands of people face every year.
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