Learn About Options for Debt Relief

Updated on 01/03/2023

Learn About Options for Debt Relief

In 2022, the estimated consumer debt was about $16 trillion. No matter how careful you are with spending, debt is often unavoidable. 

There are many reasons to fall into debt, but the most common are owing student loans, medical payments or a mortgage. 

One of the biggest issues with debt is how easily it can spiral out of control. Many individuals start out with a relatively small amount of debt, but the longer it takes to pay off your debt, the easier it usually is for your debt to snowball. 

By design, debt can be difficult to pay off, with late fees and interest rates keeping you stuck on a payment plan. While debt may seem overwhelming, there are several debt relief options to help you stabilize your finances.

Credit and Debt Consolidation

A common way to deal with debt is to use credit cards. Using a credit card can help you avoid missing payments and accruing  any extra penalty fees, but it only adds to your debt in the long run.

If you are missing credit card payments, you may face the same debt issues. A straightforward way to ease some of your credit debt is through consolidation.

With a debt transfer, you take your current credit card balance and transfer it onto a new card. If you have multiple cards, you may be able to transfer all the payments into the new card. 

While the debt must be paid off, the new credit card often has better interest rates. There are also many credit consolidation companies that will forgive some of your debt when you make the transfer. 

Debt consolidation uses a similar process to credit consolidation. With this method, a new lender purchases all your existing debts and rolls it into a new debt, which often has better interest rates and payment options compared to your previous ones. 

Another benefit of both types of consolidation is it simplifies the payment process. Instead of juggling multiple debt or credit payments, you only have one main payment to focus on.

IRS Debt Relief

Each year, most Americans are typically required to pay taxes. Paying taxes can be a stressful time if you are struggling financially, as it is usually a large payment you must make early in the year. 

Failing to file or pay on time can result in harsh fines. However, most taxpayers are unaware of IRS payment plans. If you are unable to pay your taxes in a lump settlement, you may be able to opt for a monthly payment plan. 

Setting up a payment plan is a straightforward process, but the IRS is much stricter than other debtors. 

For each month you miss a payment, you can be charged a 0.5%  late fee, which increases by another 0.5% for each additional month you fail to make your minimum payment for a maximum penalty of 25%.