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What are your debt relief options outside of bankruptcy?

If you are currently living with mass amounts of debt in Ohio, you may feel increasing pressure to do something to relieve yourself of your overwhelming financial obligations. While bankruptcy is a great way to get a fresh start, you may not be eligible for either Chapter 7 or Chapter 13 bankruptcy. Moreover, it may simply not be the best debt relief option for you. If it is not, you may wonder what, if anything, you can do.

NerdWallet outlines three different approaches you can take to debt relief, the first of which is debt management. When you join a debt management program, you make a single payment each month to a credit counseling agency, which then distributes the payment among your creditors. Because of the long-standing relationships credit counseling companies have with creditors, they can typically negotiate for reduced interest rates and waived fees, which means lower payments for you. However, the tradeoff is that you must close all your credit card accounts before joining the program, which can hurt your credit score in the beginning.

Debt settlement is another relief option. When you work with a debt settlement company, the company will ask you to stop paying your creditors and instead put your money into an account which they control. As the money accumulates in your account, and as you fall further and further behind on payments, the settlement company will approach each creditor with an offer, which is typically significantly less than what you owe. Fear of getting nothing may motivate creditors to accept a smaller lump sum and agree not to pursue you for the rest. Because debt settlement is essentially a financial game of chicken, and because the process can take years to complete, most advisors and attorneys do not recommend this approach to debt relief.

Finally, you can borrow from the above two options and create your own do-it-yourself debt relief program. Contact your creditors and explain why you have fallen behind. Most lenders have hardship programs that eliminate fees and interest and allow people to catch up. You can also educate yourself on debt settlement and try to negotiate lower payments with your creditors yourself.

The information in this post is for educational purposes only. It should not be construed as legal advice.  

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