Debt relief has been practiced in some form or another since even biblical times. Debt can pile up and eventually become such an insurmountable number that the only recourse for an individual is to request clemency, a relief in some fashion from the weight of the money owed. In modern times there are multiple methods an individual can use to request relief, the most well known of which is the act of declaring bankruptcy.
There exist two forms of bankruptcy, chapter 7 and chapter 13. Chapter 7 is the form of debt relief everyone dreams about; all debts, with the exceptions of school or government debts, are erased completely. Those attempting to collect on the money owed must cease and desist, essentially and sometimes almost a little too literally giving the debtor a get out of jail free card. Chapter 13, on the other hand, is a type of temporary debt relief that involves a federal restructuring of the amount owed. This can mean an adjusted interest rate, minimum payments, or period of recompense. Sometimes called the earner’s bankruptcy, the debts are not erased, but rather are rearranged so that they are better able to be dealt with while also providing the benefit of forcing debt collection agencies to leave the individual be.
Beyond bankruptcy, which can heavily damage a person’s credit for years to come, are the possibilities of forbearance, debt restructuring, or garnishment. Forbearance entails the removal of any interest accrued, along with all future interest payments. Essentially this reduces a debt to that of the principal amount only, and can have the effect of reducing monthly payments or the amount of time required to pay the amount off in full. Debt restructuring works in the same manner of Chapter 13, where debt is moved, consolidated, or otherwise adjusted without the hitch of bad credit. This form of debt relief is between the borrower and the lender, and is subject to the willingness of the principal lender to work with the individual. If the money owed is to a federal agency, then a salary can be garnished; money will be automatically removed from paychecks until the amount owed is fully paid for.
Unless you owe exceptionally large amounts of money, bankruptcy should be avoided at all costs, despite its appealing sound. It will take years after declaring Chapter 7 or 13 to gain even a modicum of credit, and any company that accesses your records will be unlikely to deal with you except at very high interest rates. Those interested in finding out more about debt relief can do so by contacting a local lawyer or finance office. You can also read this article about bad debt if you wish to learn more.