Debt can soon spiral out of control. Luckily, there is help available. Or so the TV adverts would have you believe. Debt relief can work. Yet, often all it does is leave you with even more debt and even less chance of paying.
If you have debt you cannot afford to pay, think carefully about who you can trust to help you. Offers you see on late-night TV or that drop through your mailbox unsolicited often fail to live up to their promises. If you prefer to do your shopping at a brick-and-mortar store, then maybe you should do the same when shopping for financial help.
Debt relief does not give you the fresh start you need
There are several big drawbacks to debt relief, compared to bankruptcy:
- Debt relief does not clear your debt: You will still need to pay most or all of the money back eventually. The longer you take to do it, the more it will be due to the accrued interest and extra charges the offering company makes a condition of any agreement.
- Debt relief is taxable: If a lender lets you off a certain amount of money, you do not save that amount. You save that amount minus the income tax you must pay on it.
If you cannot afford to pay your debts now, there is a good chance you will never be able to. Choosing debt relief may just be delaying the inevitable, ensuring the financial burden hangs over your head for years to come, and you end up filing for bankruptcy later.
Bankruptcy is not a perfect solution. It will hit your credit score harder, and you may have to give up assets in the process. Yet, if you are eligible to file for a Chapter 7 bankruptcy, it is the fastest way to a clean start.