Subhan Tariq, Esq
Understanding Debt Relief
Consumer debt is debt that is owed as a result of purchasing goods that are consumable or do not appreciate. As of the third quarter of 2019, U.S. consumer debt reached a new high of just over $14 trillion, about $1.3 trillion more than the previous record, set during the 2008 financial crisis.
The rise has been attributed to soaring student and auto loans, along with total credit card debt.
Options for mitigating consumer debt include speaking with a creditor about debt-relief measures, such as restructuring loans, or loan forgiveness or declaring personal bankruptcy, which are both forms of debt settlement.
Example of Debt Relief
Debt relief is not reserved for individual borrowers. Firms and even nations can find themselves in need of it. The Jubilee 2000, for instance, was a campaign in the 1990s by a host of nonprofit organizations, Christian organizations, and others to relieve developing nations of their debt by the year 2000. The petition had more than 21 million signers. Outcomes included wiping out approximately $100 billion of debt from 35 countries, along with increased awareness of the nature and scale of existing debt and the significant corruption behind lending and borrowing practices. Government accountability subsequently grew in this regard. Savings were used to reduce poverty and fund health, education, and rebuilding programs in these nations. Of the 40 nations served, 32 were in sub–Saharan Africa.
Disadvantages of Debt Relief
The possible drawbacks of debt relief are that it could encourage imprudent and reckless behavior by historically fiscally irresponsible parties. Some who are relieved of their debt may embark on borrowing sprees in the expectation that their creditors will eventually bail them out.
Other drawbacks include prolonging the payoff of debt due to consolidation, whereby the interest rate is lowered but the term is lengthened. In general, debt-relief measures can also negatively impact your credit score, so you should use them sparingly.
Need help regarding your debt collectors? We can Help! Call 718-674-1245 today or message us here.