The journey of becoming Debt Free – An Insight

The most interesting thing I have seen in my career is that many wealthy people fall into debt. But not everyone has to resort to bankruptcy. It is not always the best option to resolve debt problems. Bankruptcy is an option for those who have lost income, and it stays in your credit reports for 7-10 years. Therefore, I always advise debt relief options to my clients based on how much debt they have and their financial situation.

Many of my clients are wealthy people. When they ask for help to become debt-free, my team first reviews their financial situation to analyze the amount and type of debts they have. We also try to find out how much they can pay on their debts. Based on that, we try to provide appropriate debt relief solutions.

I also advise people to work with reliable debt relief organizations like Oak View Law Group (OVLG) to become debt-free. You can ask your friends and relatives for referrals for a good debt relief attorney. Somebody in your group either has had experience or knows someone who can guide you on who has an excellent reputation. They can recommend an organization they’ve worked with, or a debt relief company/law firm an acquaintance speaks highly of.
I have talked to small business owners who have been able to solve their debt problems, saving their business as well. Small business owners often consider Chapter 11 to continue the functioning of the business. However, debt relief options can help them avoid bankruptcy.

I understand that debt relief may not be common knowledge. It usually is not cocktail party talk. So, you will have to initiate the discussion when you need real help to become debt-free. Therefore, when you can’t solve your debt problems on your own, do not hesitate to ask others – Do you know somebody who provides legal help for debt relief?
Now, let’s talk about the common debt relief options a bit. When you face debt problems, you can manage your financial life by resorting to debt consolidation or debt settlement to become debt-free. By enrolling in a consolidation program, you repay multiple debts in full through single monthly payments. If the financial advisers suggest debt settlement, then you also have to make one monthly payment to the settlement company. However, in the settlement option, you get rid of your debts by paying a relatively lesser amount. How much? Well, that depends on the skill of the negotiators of your law firm or debt relief company.

Usually, the last resort to becoming debt-free is bankruptcy. By filing Chapter 7, you liquidate your assets to get discharged from most of your debts. Through Chapter 13, you pay through a court-approved repayment plan over a few years, after which you get discharged from the debts listed in your bankruptcy.
Another area I would like to talk about is the credit score. You can choose a debt relief option based on this parameter, too. Consolidation can help you improve your credit score after you repay your debts in full. However, settlement can lower your score a bit. And bankruptcy can lower your score to about 200-250 points based on your current credit score.

When talking about the journey of becoming debt-free, I should also discuss motivation. Never lose hope. I have seen many clients lose their motivation as it may take quite a bit of time to become debt-free. However, stay patient and motivated, no matter what happens during your journey. It may happen that you’re not able to save the required amount in a month. If so, talk to your debt relief organization and find a way out. However, you will repay debt faster if you can save the required amount every month. If possible, pay extra to become debt-free fast.
Before concluding, I would also like to encourage you to not think you cannot manage finances efficiently if you experience debt once. Rather, I have seen many times that my clients learn to manage finances in a better way after solving their debt problems. Once you’re in debt, you realize your mistakes. So, do not commit them again. In the case of a financial emergency, it may not be your fault that you incurred debt. Whatever be the reason, learn from it, understand money-saving strategies, have a good emergency fund, and enjoy a good financial life.

MCQ:

1. Is bankruptcy the only option to become debt-free? A. Yes B. No
   Ans.: A.
   Explanation: It is the last resort to get debt relief. Before resorting to bankruptcy, a debtor can try to consolidate or settle debts if the financial situation is not that bad.
2. Are debt consolidation and debt settlement the same?
   A. Yes
   B. No
   Ans.: B.
   Explanation: Through a debt consolidation program, you pay your debts in full, whereas, with a settlement, you become debt-free by paying less than what you owe.
3. Does your financial situation decide which debt relief option will be best for you?
   A. Yes
   B. No
   Ans.: A.
   Explanation: You have to choose from debt consolidation, debt settlement, and bankruptcy, depending on your financial situation.
4. What is a better debt relief option as far as credit score is concerned – Chapter 7 or Chapter 13 bankruptcy?
   A. Chapter 7
   B. Chapter 13
   Ans.: Chapter 13.
   Explanation: It stays on the credit report for seven years, whereas Chapter 7 stays on reports for ten years.
5. Does credit score have any effect on choosing your debt relief option?
   A. Yes
   B. No
   Ans.: A.
   Explanation: If you have a good credit score, it can help you take out a debt consolidation loan at suitable terms and conditions. By doing so, you will have to pay less on your loan through the loan term.
6. Is a consolidation program the only way to consolidate debts?
   A. Yes
   B. No
   Ans.: B.
   Explanation: Apart from enrolling in a consolidation program, you can take out a consolidation loan or choose a balance transfer method. However, if you want complete professional help, then a consolidation program is the best option.
7. Do you have a choice in which bankruptcy chapter you file?
   A. Yes
   B. No
   Ans.: B.
   Explanation: You will have to pass the Means Test to qualify for a specific bankruptcy chapter.
8. Which is better, a debt relief company or a law firm?
   A. Debt relief company
   B. Law firm
   Ans.: B.
   Explanation: A law firm is always better since it can handle all legal implications if needed.
9. Do I need to visit a law firm physically to get debt help?
   A. Yes
   B. No
   Ans.: B.
   Explanation: You can get debt help online even without visiting a law firm once.
10. Does your financial situation determine how long it will take to become debt-free?
    A. Yes
    B. No
    Ans.: A.
    Explanation: How much you can pay every month is an important criterion to decide how long it will take to become debt-free.

Author Bio
Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. He graduated from the University of the Pacific’s McGeorge School of Law and now serves as a principal attorney for the Oak View Law Group.