If you’re bogged down by debt, you may wonder whether the government can help bail you out. Let’s look at what kinds of limited debt relief the government may offer, along with some non-government alternatives.
Government Debt Relief for Different Kinds of Debt
The government has certain initiatives to assist individuals in debt, although not many consumers may know about them. So, what are the best government debt relief programs? Let’s take a look.
Help with Taxes
The Fresh Start program, Installment Agreement, and Offer in Compromise are all Internal Revenue Service programs that can assist you with overwhelming tax debt through debt consolidation, debt settlement, or rules that make repayment easier.
Income-Based Student Loan Repayment
Regarding student loans, the best government debt relief programs can lower your monthly payments. New terms depend on what you bring in monthly and your family size. The aim is to make your student loan payments more manageable by basing them on your income.
While there are strict qualification requirements, there is also Total and Permanent Disability Discharge, which could get your student loan balance discharged if you’re experiencing long-term disability.
Also, if you’re a nurse or emergency medical technician employed at a public hospital, or a first responder, you might qualify for a federal 10-year public service loan forgiveness program through which your outstanding student loan debt may be forgiven.
Government Protection against Debt and Debt Collectors
One of the main ways in which the government provides debt relief is through legal protections such as the Fair Debt Collection Practices Act, which limits what debt collectors can do to get you to pay up, including the use of abusive or threatening language.
The government also offers debt relief through court-approved bankruptcy, be it Chapter 7, which can involve asset liquidation, or a Chapter 13 payment plan.
What About Credit Card Debt?
You’re out of luck if you’re hoping the government can relieve you of your credit card debt. However, there are several non-government programs and approaches you can use to help get you out of debt.
Consumer Credit Counseling
A credit counseling agency can help you find a manageable monthly payment for your unsecured obligations. It will set you up with a three- to five-year debt management plan with your creditors that typically includes a lower payment and interest rate. No credit card use is allowed while you’re on the plan.
This entails combining all your debts into one monthly payment, hopefully at a better interest rate. Some programs involve you taking out a loan — if you have good credit — to cover high-interest debt such as with credit cards. This also simplifies bill paying since you just have the one monthly bill to worry about.
This involves you paying a debt settlement company to negotiate with your creditors on your behalf to try to get them to accept less than what you owe to “settle” your debt. Because most programs will get you to first stop paying your creditors, the idea is that the creditors will take something rather than nothing. This strategy will hurt your credit, at least until you’re on a more solid financial foundation.
What are the best government debt relief programs? Well, it depends on your situation. But if you have credit card or other unsecured debt, you may want to seek out non-government alternatives help you get on track. Freedom Debt Relief may be a good place to start.