Understanding Debt Relief Options
For residents of New Mexico who are going through difficult financial times and searching for debt relief options to keep from falling deeper and deeper into debt, there are a variety of debt relief programs to consider, in addition to personal bankruptcy. It's a fact of life that many consumers find themselves in over their heads and need assistance to help with managing, reducing or paying off debts from credit cards and unsecured debts such as utilities, department store charges, or medical bills. The good news is, there are debt relief options or "solutions" that may allow you to lower your payments, reduce debts, save money, and get out of debt at an accelerated pace. These debt relief options typically include debt consolidation, debt management via credit counseling, debt settlement or even bankruptcy.
If you are struggling with credit card debts and in need of debt relief, find out how structured debt relief plans could help you save money and resolve debts faster. Get your free debt relief evaluation and savings estimate from a BBB-accredited debt relief provider.
How Debt Management or Debt Consolidation Plans Work
A debt consolidation program, also known as a debt management program (DMP), is intended to combine or consolidate multiple high-interest consumer debts into one more affordable monthly payment. Debt consolidation typically can help consumers with high interest debts spread across multiple credit cards by combining or "consolidating" those debts into a single, more predictable payment plan made to a credit counseling agency.
The purpose of a debt management plan arranged through a certified credit counselor is for the counselors, working on behalf of consumers, to speak personally with consumers to get a good feel for their existing debt load and the amount of money consumers can reasonably afford each month to pay down their debts on a predetermined schedule. Credit counselors then will typically contact creditors one by one and request that they accept proposals to extend the benefits of debt relief to consumers who are experiencing a financial hardship. These benefits may include a lowering of interest rates, a waiving of late fees and penalties, and even monthly payments that are more affordable and easier to manage.
There is good news: Once consumers stop racking up new credit card charges and begin to consistently pay down debts at lower interest rates, the process of debt resolution and paying off the principal amount of debt becomes predictable – and even exciting for consumers who are used to living with spiraling debt. While debt management plans are not the "silver bullet" of debt relief, they can be very effective and save a fair amount of money if followed faithfully. Overall, they are an honorable way for consumers to get out of debt on a tried and true path and live up to their financial obligations as promised.
If you are considering debt consolidation or a debt management plan coordinated with the help of an accredited debt relief or credit counselor, take a moment to find out how debt relief plans may be able to help you resolve debts faster. Get your free debt relief evaluation and savings estimate.
What Is Debt Settlement and How Does It Work?
Debt settlement or debt negotiation is a debt relief option that is more commonly utilized by individuals and families who have high interest, high-balance credit card debt and are seriously considering bankruptcy. While debt consolidation or debt management is intended to pay off the full amount of multiple high interest debts, just at a lower interest rate and via one consolidated monthly payment; the goal of debt settlement is to negotiate with creditors in hopes that they will agree to accept a reduced amount compared to what was originally owed. Many consumers see debt settlement or debt negotiation as an honest way to pay back a portion of their debts without declaring personal bankruptcy, and potentially save a considerable amount of money in the process.
However, it's important to understand that even though debt settlement may save you a significant amount of money, this form of debt relief can also have its drawbacks. For instance, when you enroll in a debt settlement program, your credit score will typically be impacted negatively because when you settle your debts, it usually involves "falling behind" on your monthly credit card payments in order to redirect the funds to build up a settlement offer for a creditor. In addition, as you fall behind in making payments, creditors may threaten, or take, legal action as you are not living up to the terms of your credit card agreements. Lastly, consumers need to be aware that ANY amount of money saved through debt settlement is subject to federal taxes.
Credit card companies have their reasons for wanting to "settle" with consumers for less than the complete amount owed. For consumers who fall behind in payments by 90 to 120 days or more, credit card companies may often "sell off" what is considered "bad debt" to a third party collector for as little as 10 cents on the dollar, so it is not surprising that creditors may be willing to accept a reasonable settlement offer from consumers rather than get little or nothing if the debt is "sold off" or the consumer is going through such a financial hardship that they file for personal bankruptcy. Finally, debt settlement will typically lower your personal credit score, but personal bankruptcy will have a more serious, longer lasting effect.
If you are trying to manage credit cards or other unsecured debts or going through a financial hardship and need to review your debt relief options, you can request a free debt relief evaluation and savings estimate today.
Financial Assistance from the State
Like the federal government, the state of New Mexico does not offer specific credit card relief programs, grants, or consolidation loans to help consumers pay off their credit card debt obligations. The good news is, the state does offer several areas of support, helping residents get access to food, medical assistance, housing assistance or childcare. Examples of such programs may include the New Mexico Low Income Home Energy Assistance Program (LIHEAP), Medicaid and Head Start, among many others. To learn more about these resources and more, go to the state's homepage Benefits section.
Are You Experiencing a Financial Hardship and Need Relief?
As you explore debt relief programs, it's worth noting that whether it's debt consolidation coordinated by a consumer credit counselor, or debt settlement using the services of a debt negotiator, they are all designed to help individuals and families who are experiencing a financial hardship. Debt relief programs are not for folks who are financially fit and able but simply want to walk away from debts and ignore the terms of their original cardholder agreements. Just as the option of personal bankruptcy was overused on multiple occasions until the "bankruptcy means test" was put into effect to end this practice, there are financially capable consumers who choose to take advantage of debt relief programs that are designed to provide a safety net for less fortunate individuals and families.