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Debt forgiveness is when a lender writes off some or all of your outstanding debt. Although this looks great on paper, most debt forgiveness options come with some sort of catch. There’s also the chance that you may come across fraudulent debt forgiveness scams, so it’s crucial that you research thoroughly and read all of the fine print before signing up for a debt forgiveness program or service.
Your debt forgiveness choices vary greatly depending on the type of debt you are addressing, and each option comes with its own set of requirements, rules, tax bills and potential credit impact. Below are a few common debt forgiveness options:
Credit card companies may forgive a portion of your balance through a debt consolidation process. When you work with a debt consolidation organization, their experts will work on your behalf to help reduce the amount you currently owe.
Although it isn’t an overnight fix, debt consolidation companies can help streamline your debt repayment by creating a clear process and timeline for you to follow. If successful, you should be able to pay off your enrolled debt in 12-48 months.
When it comes to student loan debt, your options vary based on whether the loan is a private or federal loan.
Student loan forgiveness programs for federal loans are typically difficult to qualify for, as they’re often based on your income, the kind of work you do and the amount you owe. The most common student loan forgiveness programs are available to those who work in public service, the military or education. More details on the available types of loan forgiveness, cancellation and discharge plans can be found on the Federal Student Aid website.
Those dealing with private student loans may be able to find partial debt forgiveness with the help of a debt consolidation company. Many also pursue relief from their debt through debt consolidation loans and credit counseling, but it’s important to remember that these options cannot reduce your original balance.
If you are struggling to keep up with your medical bills, you should first reach out to your healthcare provider and attempt to work out a discount. Your service provider may offer an income-based sliding scale payment program or a repayment plan that allows smaller payments over a period of time. Be sure to take a careful look at the items and services you were charged for, as there’s always a chance that there may be billing errors.
If you qualify for Medicaid, you might be able to have a portion or all of your outstanding medical bills covered. Medicaid programs vary by state; more information can be found at Medicaid.gov.
Although it’s not guaranteed, debt consolidation companies may be able to get a portion of your medical debt forgiven.When you’ve exhausted your other options, this could be something to look into.
Although you may be able to receive a form of debt forgiveness through bankruptcy, the legal process comes with some disadvantages. Besides the costly legal fees, bankruptcy can have long-term consequences. At the end of both the Chapter 7 and Chapter 13 bankruptcy process, the court could choose to discharge your remaining unsecured debts. However, the bankruptcy filing could stay on your credit report for up to 10 years, which can greatly affect your future credit applications. Also, unless specifically sealed, bankruptcy cases are available for public viewing.
But even with these drawbacks, depending on your unique financial situation, bankruptcy might still be your best option. Always speak with an attorney before proceeding with a bankruptcy filing.
It’s crucial to create a plan and take action if you want to regain control of your finances. Reaching out to your creditors directly to discuss any debt forgiveness or repayment options could result in receiving much-needed assistance.
If your negotiations with creditors are unsuccessful, don’t panic - your next best step is to consult with debt solutions specialists. Accredited Debt Relief’s experienced team has helped people across the US pay off their debts faster. Contact us today for a free consultation.