Unsecured Debt Solutions

The combined effects of the recent recession and the abundance of unsecured debt that Americans are now carrying have motivated millions to scramble for possible solutions to their financial problems. The recession has wreaked havoc throughout the jobs market, the housing market and the lending industry while the cost of essentials like food and energy have taken a steady rise. The run-up to the recession was characterized by easy credit and high levels of consumer spending, and the worst effects of this behavior are now being fully realized as many struggle just to make the minimum monthly payments on their excessively high interest rate accounts. With their resulting payoff prospects literally extending to decades, consumers need effective solutions to their debt predicaments.

People with small financial problems can start off by trying thrift and discipline. It is feasible that adequate relief can occur simply by cutting down expenses and using the money to pay down debt instead. Debt problems of a more serious nature would do well to combine thrift and discipline with one of the other debt solutions available.

Refinancing the high interest debt by using the equity in a home as security is a straightforward method of converting the debt to lower interest rates. But the combination of reduced equity levels and strict lending guidelines have made this option difficult to take advantage of. So-called debt consolidation loans for unsecured debt have all but disappeared from the marketplace for the time being.

Credit counseling is an attractive option for many with its combination of benefits such as expert financial counseling and a debt management plan (DMP), offering interest rate relief, credit score preservation and other forms of relief. Debt settlement holds the potential for even more substantial benefits, however credit damage and a relatively long, stressful program can cause many to drop out of the program before their accounts have been settled successfully. Even worse, consumers have been plagued by dishonest settlement companies that took their money and did very little else.

Bankruptcy is a solution of last resort for many due to the dire credit consequences which can last for 7 to 10 years. Still, the relief offered by a Chapter 7 bankruptcy may be the only real solution for those completely overwhelmed by their debt and able to pass the 2-part “means test” instituted in the 2005 reforms. Otherwise, a Chapter 13 court-determined repayment plan may be a bitter pill to swallow given the stiff penalty also paid in ruined credit.

As you can see, there are solutions available for those who have found themselves in serious trouble with their unsecured debt. If it is at all possible, it is recommended that thrift and discipline be the sole solution utilized to solve the problem. Credit counseling should be considered by those who are intent on finding a solution that will not negatively impact the credit score.

About the author: Jackson Roberts is a professional debt advisor for professional debt relief services company. He also regularly writes informative articles about debt relief help.