Debt Relief Quest
Our Tips Set You on Course

As you embark on a debt relief quest and investigate all your debt relief options you will find all the tips and information you need to be successful right here at Smart Debt Repair. It seems like everyone is experiencing some financial difficulties in this poor economy, and on occasion the only option is to seek help.

Depending on your income, the amount you owe and complexity of your debt, approaches to debt relief will differ from voluntary budgeting to credit counseling to consolidation to bankruptcy.

Smaller debts, generally an amount under $5000 are considered good candidates for voluntary budget adjustments, larger debts may put you in position where some kind of consolidation or counseling program will be your best chance for success, while those debts reaching over $10,000 or more may require more drastic action, such as filing bankruptcy.

When you begin your debt relief quest, you will find yourself confronted with many terms and legal concepts used in the process of reworking all sorts of financial situations. Here are some of the more common terms applied to debt relief implementation by credit counselors, lawyers and other financial specialists.

Debt/Payment Consolidation

If you choose to consolidate your debts you will be obligated to make only one payment a month rather than several. You can either do this on your own or consult with a credit counselor who will work with your creditors to try and attempt to engage them in a more viable repayment plan.

Those individuals who own a home may under certain circumstances be able to take out a second mortgage, pay off all of their debts and have just one payment every month solely to the mortgage company. Homeowners who opt to consolidate their debts by refinancing their house will have to be especially cautious about resisting the same actions that put them in a financially unstable position in the first place from happening again. Otherwise, consolidating their debts by taking out a second mortgage will not accomplish anything and could lead to a much more severe financial crunch.

Debt Forgiveness

Debt forgiveness, or debt cancellation, refers to credit card companies that agree to accept a single lump-sum payment to clear your outstanding balance with the amount agreed upon being much lower than what you actually owed. Research has revealed that many credit card issuers will forgive 60% to 70% of a customer's debt just to receive some sort of monetary compensation they might not otherwise get should the debtor head off to bankruptcy court.

Also be aware that U.S. tax law treats debt that is forgiven as income because this essentially increases an individual's net worth, a bit of information you might not find anywhere else during your debt relief quest. The tax form needed is the 1099-C, which reports amount of debt forgiveness that exceeds $600.

Credit Counseling Services

A debt relief quest will likely set you on course to investigate credit counseling services. They offer assistance by negotiating reduced payments, reduced interest rates or alternating payment plans with your creditors. Many of the more prominent credit counseling services already have long-standing relationships with credit card companies, loan agencies and other financial institutions. They understand what can be done about your debt problems and how to get it done as quickly as possible. Some credit counseling services will charge a fee for settling your debt problem, while others are non-profit agencies which work through community outreach services. Performing a thorough debt relief quest to familiarize youself with the many credit counseling services available.

Your Last Resort—Bankruptcy

Should you be forced to declare bankruptcy your monthly expenses and income will be investigated by an attorney and compared to your state's standards of median income and family size. If eligible to file, you may also be required to attend credit counseling sessions with professionals who will examine your spending habits and what occurred to force you to have to file bankruptcy. Filing bankruptcy also means creditors are no longer permitted to call you and are obligated to cease any collection efforts they have been enacting on your behalf.