How Does Debt Repair Really Work?

Posted in Credit , Credit Repair • October 16, 2009

debt repair

We’ve been getting a lot of questions about how debt repair really works. Sometimes, it can be tough to know exactly how to get out of debt, so we asked a company, Simplified Debt Solutions, to give us the 411.

Understanding Your Debt

Often times, we accumulate debt and have no idea how it happened. Sometimes it can be a gradual process (maxing out credit cards, taking out student loans over the years) and other times it can happen seemingly overnight (one or more major medical bills after a car accident or sudden illness).

No matter how you accumulated your debt, it can do some serious damage to your credit rating. However, if you’re ready to put your credit back in good standing, this is good news. Now your job is to determine how you want to repair your debt. According to Simplified Debt Solutions, there are a number of options to choose from, including debt settlement, debt consolidation, credit counseling and even bankruptcy.

Choosing a Way to Repair Your Debt

Looking at your debt repair options and actually making a choice can be a frightening prospect because once you choose to move in a specific direction, you may have to obligate a large portion of money towards bills you may not have been paying. However, choosing an option is a realistic step in repairing your debt, so let’s take a closer look at some of your options.

  • Debt Settlement: Debt settlement is a process of negotiating your outstanding unsecured debt balances down so you can repay your amount owed in a short amount of time. Companies like Simplified Debt Solutions work with you to set up a savings account and build money each month until you have a lump sum to pay to your creditor.
  • Debt Consolidation: Consolidating your debt is similar to consolidating a student loan. The lender loans you money to pay off your debt then combines your owed accounts into one lump sum payment that will be paid back to the lender with interest. The downside to consolidation is that depending on your amount of debt, collateral like a home or car may be required. If you’re not able to fulfill your repayment obligation, you could lose your collateral.
  • Credit Counseling: Some companies offer credit counseling services that work with creditors to reduce your payments or even create a debt repayment plan. However, Simplified Debt Solutions warns that some credit counseling organizations charge high hidden fees or may take part in other unsatisfactory practices that leave you owing more than before you sought their advice.
  • Bankruptcy: If you have no other option to repay your debts, filing bankruptcy under either Chapter 7 (total liquidation of your assets) or Chapter (debt adjustment and repayment) is a good alternative. However, it’s important to keep in mind that a bankruptcy remains on your credit report for up to 10 years, so if you travel this route, beware of its repercussions.

Understanding how debt repair really works is important if you’re thinking of getting your credit in good standing. To learn more about debt repair options, visit Simplified Debt Solutions.

Simplified Debt Solutions offers a consultative approach to meet each client’s unique needs. Debt settlement is a great approach to dealing with overwhelming medical bills, credit card debt, repossessions and any unsecured debt. Simplified Debt Solutions offers free consultations to help you find the best plan to fit your individual needs.

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