Total Debt Relief
Does It Exist?

Is total debt relief possible? Many people who are in debt ask themselves this question everyday. This could be a solution that hits the reset button on your finances and let's you start again from scratch.

Well, in some respects there are debt reduction programs out there that offer a reasonable solution. None of them, however, are particularly easy for the debtor. There is simply no such thing as a get out of jail free card when it comes to debt—there is always going to be some pain involved.

With that caution in mind, let's take a quick look at a few solutions which can potentially relieve you of all your debts in a relatively short period of time. As with any financial plan, your mileage may vary.

Debt Relief through Bankruptcy

Bankruptcy is the only option that can truly clear all your debts if you are in extreme circumstance where paying back the money you owe via any normal means is impossible. Of course, it is not as simple as it sounds either, you can’t just wipe the slate clean without facing some severe negative consequences.

Assuming you actually qualify to file for bankruptcy and the procedure goes ahead as planned, here are some of the negative effects you will face afterwords.

• A bankruptcy filing of any sort will hit your credit score hard, lowering it significantly for a long period of time.
• There is a strong likelihood you will to lose virtually all of your assets.
• Certain jobs would become unavailable to you in your post bankruptcy world.
• Your ability to start a new business may be severely impacted by any bankruptcy filing.

Even with all these downsides out in the open, for some individuals' bankruptcy may still be your best or only option. If you are staring at decades of paying off loans just to get out from under a heavy debt burden or living with bad credit for seven years, for many the choice will be clear. Your individual circumstances will play into any decision so in most cases it would be wise to consult with a bankruptcy lawyer before you decide.

Debt Settlement

If you are in debt, you have no doubt heard about debt settlement as an option for total debt relief. As with bankruptcy, debt settlement can clear your debt burden completely in some cases. You would still have to make a partial payment of the debt. Debt settlement is not a form of debt forgiveness.

Debt Forgiveness—Beware

If any individual or company claims there is a loophole in the law you can use to clear your debts without the pain of paying the money back, or declaring bankruptcy, or going through a debt settlement, run, and run fast in the opposite direction. While in some rare cases you may be able to find a loophole, due to a fault in the procedures of your creditors, for instance, this kind of talk usually comes from the mouths of scammers.

You may hear the term debt forgiveness used in government legislation. In this context it typically refers to the waiving of taxes or some other form of tax relief related to a debt which has been cancelled, since the canceling of a debt would result in an income tax liability for the person who had the debt wiped out. This would only apply in very specific circumstances.

Realistically, any form of debt relief you run into will most likely help you over a long period of time with partial debt relief and give you the breathing room you need to recover and change your financial habits.