Debt Relief & Management Legal Center

Few things in life are more stressful than facing a hefty amount of debt. No matter how much you owe, debt can make living your life nearly impossible. Whether it is creditors seeking repayment or collection agencies leaving threatening messages, nothing about the situation is easy. Fortunately, there are many methods available that can help you manage your debt and regain control of your financial situation. According to a 2012 report from the Federal Reserve Bank of New York, these debt management strategies have helped Americans cut their aggregate debt by $100 billion in less than a year.

Credit Counselors

One of the most harmful side effects of substantial debt is a bad credit score. A credit score is based on your outstanding debts and record of repayment. Credit scores are used for financial lending and leasing purposes. Many banks will refuse to make a loan to an individual whose credit score is below a certain level. If you are dealing with a low credit score or having trouble managing debt, a credit counselor can help. Credit counselors will review your financial situation and help you determine your best options for gaining control of your finances. Credit counselors can also provide you with basic information on money management and can assist you with targeting areas in your finances that can be reallocated to debt repayment or savings. Most importantly, a credit counselor will help you establish a financial plan going forward that can thwart new sources of debt and ensure that your financial situation continues to approve. Many credit counseling services are hosted by non-profit organizations and offer free or low-cost services.

Debt Management Plans

Another method for handling debt is to establish a debt management plan, which includes an agreement between the debtor and the loan provider or creditor regarding the debtor’s repayment of outstanding amounts. Some of the advantages to seeking a debt management plan include the availability of lower interest rates, extended repayment terms, or a reduction of the total debt owed. In some situations, a debt management plan involves consolidating your debt, setting up automatic payments, or entering into a contract with the debt management plan provider. Frequently, a credit counseling agency will assist the debtor with negotiating the terms of the debt management plan. The counselor will review the debtor’s finances and income, and help the debtor set up a payment plan.

Mortgage Loan Modification

Mortgage loan modifications are another popular way to restructure your debt, especially if the debtor owes a significant amount on a home loan. For example, if your financial circumstances change after you take out a home loan, a mortgage loan modification can help you adjust the interest rate or repayment term in order to accommodate your new financial abilities. A modification can also help prevent a foreclosure proceeding, in which the bank takes possession of the home and sells it in order to cover the outstanding debt, and it is less injurious to the debtor’s credit score than a foreclosure.

Finally, saving money, no matter how small or large the sum, can help you bounce back from an unexpected financial situation in the future. It may seem impossible to save money while paying down debt, but utilizing one of these debt management strategies can help you figure out how to start creating a rainy day fund or nest egg.

Last reviewed October 2023

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Frequently Asked Questions

Is it legal for collectors to call late at night or early in the morning?
Under federal law, collectors are not allowed to call you late at night or in any other inconvenient manner. They also cannot call you at work if they know your employer prohibits collection calls.
Can my car be repossessed without warning?
A lender is usually not required to notify a borrower before they repossess a vehicle, though in some states they must. After repossession, the lender must tell you how you can get your vehicle back.
Am I responsible for debts my spouse incurred before we got married?
You are generally not liable for debts your spouse took on before marriage. However, joint assets can be at risk if a creditor chooses to pursue your spouse’s half of such an asset to fulfill a debt.
Can a credit card company garnish my wages?
Credit card companies cannot garnish a consumer’s wages without a court order. The consumer will have an opportunity to object, and the garnishment amount is limited under federal and often state law.
How long will an unpaid debt stay on my credit report?
Most negative items, such as collections and foreclosures, will remain on your credit report for a period of seven years, though things like bankruptcies can remain on the report for 10 years or more.

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Popular Topics

Credit Counseling
Credit counseling can help you better understand your financial situation, negotiate with creditors, establish a debt repayment plan, consolidate debts, and slowly improve your credit score over time.
Mortgage Loan Modification
Borrowers who are concerned about foreclosure may be able to remain in their homes by seeking a mortgage loan modification, which restructures the initial loan contract and changes the payment terms.
Debt Management Plans
A debt management plan can help you renegotiate the terms of your debts with creditors, consolidate your monthly bills into a single payment, lower interest rates and fees, and stop collection calls.
Negotiating With Collectors
It may be possible to reach a resolution with a collector by negotiating to pay them a lump sum that is less than your total debt, or potentially getting them to agree to an installment payment plan.
Creditor Lawsuits
If you have been sued by a creditor, it is important to respond to the lawsuit to avoid a default judgment. If you do not wish to litigate the case, it is often possible to negotiate a settlement.

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