Debt Cancellation
Bad Debt Consolidation by splinder
Filed under Bankruptcy, Debt Consolidation, Debt Management, debt reduction
Debt cancellation is the partial or complete absolution of debt, which may be granted to individuals, businesses or even countries under certain circumstances. You become eligible for debt cancellation when you are insolvent, which is when the total value of your debt is more than the fair value of your assets.[br]
Types of Debt Cancellation Programs
There are several types of debt cancellation programs available to a borrower. You can choose any one of these depending on your financial situation:
- Debt management program: This program, also called debt consolidation, is useful for people who can continue to repay their debt but are unable to meet the monthly minimums. Borrowers may also opt for this program if they want to reduce the interest rate applicable on their loan. These programs help in:
- Reducing your monthly debt payments
- Consolidating your debt payments, simplifying your monthly budgeting
- Reducing your total interest payments
- Eliminating late fees on your credit cards
- Getting rid of collection calls from credit card issuers or collection agencies.
- Debt negotiation program: Through this program, you can reduce the total amount of debt owed by you. This program is especially useful for people who are going through hardships, such as loss of job or illness, and are unable to make their loan payment. People considering bankruptcy can also use this debt cancellation program. Under this program, you, along with your professional debt negotiator, can bargain for a lump sum payment with your creditors to settle the debts. Through negotiations, the total payment amount can be reduced to as little as 10%-15% of the total outstanding amount.[br]
- Debt consolidation loan: This program works on the theory that a new debt with a longer payback period and lower interest rate is better than old debts with higher interest rates. You can use the proceeds from the new loan to repay all your existing debt liabilities. With this, you not only make yourself comfortable financially but also improve your credit rating. This option works best for homeowners who can use your home as collateral for the new loan, thus earning tax deductions.
- Bankruptcy: Seeking refuge under Chapter 11 and declaring bankruptcy is the last resort. Opting for this program may not be advisable, since it stays on your credit record for ten years and may not help you absolve certain loans, such as student loans.