If you\’re trying to obtain debt relief, you\’re not alone. Millions of Americans are swimming in debt caused by loss of financial investments, loss of employment, and over-financed mortgages. Recent reports claim 1 of every 7 Americans live at or below poverty level. Millions more are facing foreclosure and personal bankruptcy.

It\’s easy to locate debt relief programs, but many of these companies offer false promises they cannot fulfill. Countless consumer fraud investigations stem from debt help organizations that charged debtors money, but didn\’t provide financial relief.

It is important to realize that creditors are not bound by law to reduce outstanding balances because debtors can\’t pay their bills. Some will offer deferred payments or reduced interest rates when debtors can provide a reasonable repayment plan. Others will reduce principal balances if debtors are able to offer lump sum cash.

When debts exceed $10,000 it can be beneficial to engage in credit counseling. Counselors can help devise household budgets and may be able to negotiate with creditors to obtain lower payments.

Credit counseling is particularly helpful for individuals who struggle with making ends meet. People often fail to realize how much money they waste each month. From fast food lunches and morning lattes to movie rentals and yard sale bargains, Americans spend close to $500 per month on unnecessary items.

On average, half of the $500 is charged to credit cards. The majority of consumers remit the minimum monthly payment which only covers interest and does not reduce the principal balance. Consider this… If you charge $250 per month and only pay the minimum amount, you can accrue over $3000 of additional debt annually.

People often overlook credit counseling because it costs money to participate. However, non-profit agencies use a sliding scale based on earned income to determine fees. It\’s smarter to spend money learning how to manage personal finances than to continue doing nothing to resolve problems.

Individuals who feel they may have to file personal bankruptcy should consider obtaining credit counseling from agencies approved by the U.S. Trustee. New bankruptcy laws require debtors to engage in counseling prior to obtaining bankruptcy approval. It\’s better to participate in counseling through an approved agency than to have to go through it again if bankruptcy is required.

Bankruptcy should always be the last resort for obtaining debt relief. This strategy has far-reaching effects that can take years to overcome. For many, bankruptcy causes more problems than it solves, so careful consideration is required.

Petitioners must comply with regulations set forth in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Most people are required to pay back outstanding debts via Chapter 13 payments. These payments are supervised by the court and plans can last up to 5 years.

During the repayment phase debtors are prohibited from incurring new debt without court approval. If debtors miss payments the Trustee can request the petition be dismissed. If debtors fail out of bankruptcy they lose protection from the court and creditors can engage in collection actions including repossession of property and wage garnishment.

One underutilized debt relief strategy is budgeting. This option doesn\’t cost any money, but does require self-discipline. The goal is simple. Spend less than is earned. While this can be easier said than done, it is achievable.

To succeed with budgeting requires creating a list of fixed expenses and earned income. If expenses are higher than income, plans must be made to reduce expenses. This might include selling a second car, eliminating cable or cell phones, entering into utility budget plans, taking brown bag lunches, or eating dinner at home.

Debt relief is possible through careful financial planning. Take time to conduct research to determine which options are best suited for your personal situation than take necessary action. It\’s best to obtain information from trusted professionals such as MyMoney.gov, and financial experts such as Dave Ramsey and Suze Orman.

Author Bio: Simon Volkov is a California real estate investor who shares personal finance and investing information. He offers numerous debt relief articles covering topics of budgeting, bankruptcy, debt settlement, and credit counseling at www.SimonVolkov.com.

Category: Finances
Keywords: debt relief,personal bankruptcy,budgeting,credit counseling,chapter 13 payments,personal finance