Last Updated on July 28, 2023 by Mike

How to Get Relief from Secured & Unsecured Debt?

These days, having too much debt just mean bleeding like a stuck pig. We know that it’s not a pleasant experience for anyone if he is unable to pay his monthly debt payments. However, if this happens, you need not to worry, as there are several debt relief options for both secured and unsecured debt.

Secured and Unsecured Debt

If any asset does not secure a debt, it is considered as unsecured debt. Credit card payments, personal loans and medical bills are treated as unsecured debt. However, loans like payday loans or pawnshops loans are secured by your postdated check. A loan that is secured by an asset is called a secured debt. A car or property is always considered as a secured loan. For instance, a home mortgage is a secured loan.

Renegotiation

Renegotiation is often compared to a debt settlement. Actually, in a renegotiation, you request your creditor to lower the interest rate and waive any late fee that was incurred.  A debtor can renegotiate either for home mortgage or for unsecured debt like credit card debt. If your current interest rate is 15% and if after a renegotiation it comes down to 10%, your monthly payments will significantly get lowered. This will further help you pay off your debt quickly.

Credit Counseling – A Significant Method

A credit counseling company assesses your income, expenses and assets to develop a budget for you. A credit counselor just helps you work out a budget so that you can pay off your debt within a span of 3-5 years. In a credit counseling plan, a credit counselor may even advice to sell your assets in order to get rid of your debt. Often, a credit counselor also works with your creditor to negotiate interest rates and monthly payments. Your credit counselor may also negotiate a waiver of past fees.

Debt Settlement

Debt settlement is a viable option to settle your unpaid debts. In a debt settlement, you offer the creditor about 30%-40% of the debt amount to completely settle your debt. However, for this, you should be prepared to provide a lump-sum amount to your creditor. Again, debt settlement has a tax implication as the forgiven amount is considered as income. Further, as there are many scam entities mushrooming these days, you should always remain cautious.

Bankruptcy

Bankruptcy is often treated as the last resort and needs a court procedure to discharge your debts. Though nearly every kind of debt is dischargeable through bankruptcy, some like past taxes, federal student loans, child support and alimony are not dischargeable in a bankruptcy.