Debt Relief Qualifications

Facing your debt is the first step to a future without debt. So the fact that you're looking into ways to deal with your debt for good is a great sign. It means you're past the first step and ready to take another on the journey to debt freedom.

Is that next step debt relief? If you're facing financial hardship and looking for options, debt relief could be the very thing you need to get rid of your debt.

First things first, though: Let’s find out if you qualify for debt relief. More people qualify than you may think. Let's explore the qualifications, your possible strategies, and how you can get started.

Who Qualifies for Debt Relief?

The nice thing about debt relief is that many people qualify because there's only one real requirement: financial hardship. Debt relief could be an option for you as long as you're facing a financial hardship that means you can't afford to repay your debts.

Debt relief works by negotiating with your creditors to accept less than you owe to settle your debt. (That's why it's also called debt settlement.) Financial hardship is required because that's what encourages your creditors to negotiate with you in the first place: When they understand you're struggling, they might decide that getting some money is better than getting no money.

You’ll need a bit of money to negotiate with. You could have this already, or you could save this up. If you stop making your debt payments while you save money for settlement offers, expect damage to your credit profile. If you’re already behind due to financial hardship, the extra impact might be less. 

You don't need good credit—or even fair credit—to qualify for debt relief.

Who qualifies for professional debt relief?

Anyone can negotiate with their own creditors. Or you could hire a professional debt relief company to do it for you. If you want to go with a professional debt settlement company, you might have to meet a few more qualifications. 

For example, many debt relief companies require a minimum debt amount—usually between $7,500 and $10,000 in unsecured debt. That's debt without something of value backing it up. Unsecured debts include personal loans, credit card debt, and medical bills.

In addition, you'll need to agree to make consistent deposits into a dedicated account. That's where you'll put the money that's later used to negotiate with your creditors.

What Counts as Financial Hardship?

Now you know that you need to face financial hardship to qualify for debt relief. What does that even mean? Financial hardship could refer to a number of situations that make it hard or impossible to pay off your debt.

Examples of financial hardship include:

• You lost your job

• Your work hours were cut

• You got divorced

• Your spouse was injured or has died

• You're injured or have become disabled

• You're facing big medical bills

• You experienced a natural disaster

• You were the victim of financial abuse

You may have a situation that isn't listed above. Don’t worry. If it's preventing you from paying your debts, it could qualify as financial hardship. If you're not sure, you can always contact a debt relief professional to discuss your situation.

What Types of Debt Qualify for Debt Relief?

Debt relief through debt settlement generally only works for unsecured debts. That means debts with no collateral attached, or something of value backing them up. Some examples of unsecured debts include:

• Credit cards

• Personal loans

• Medical bills

• Store cards

• Most personal lines of credit

• Payday loans

• Some private student loans

Secured debt, like a mortgage or auto loan, won't typically qualify for debt settlement. That's because lenders could take your collateral—such as your house or car—to get back the money you borrowed. When they have that option, lenders are unlikely to negotiate what you owe.

Other ineligible debts could include federal student loans, tax debts, child support or alimony, and current utility bills (though if they're in collections, they may be eligible). If you're not sure what qualifies, ask a professional debt consultant for clarification.

How to Find Out if You Qualify for Debt Relief

The simplest way to find out if you qualify for debt relief is to ask. You can contact a debt consultant for a free consultation that helps you figure out your options.

When you call, you'll go through a free debt evaluation:

• You and the debt expert will go over your existing debts, monthly income, and your monthly expenses.

• The debt expert will help you understand whether debt relief fits your current situation.

• Your full evaluation should only take a few minutes and doesn't require any commitment.

If you find that debt relief is the right next step, you can move on from there. If not, then you're no worse off than you were before—if anything, you should have a better idea of what options are available to you.

Other Debt Relief Options to Consider

It's always smart to look at all your possible strategies before making a decision, especially for something as big as managing your debt. So what other choices do you have? Here are some alternatives to debt settlement to explore:

• DIY debt payoff. If you can afford your debts and you want to put them behind you, consider a DIY payoff strategy like the debt snowball or debt avalanche method.

• Debt consolidation. If you have decent credit, a debt consolidation loan is a way to pay off multiple debts with a new loan, ideally at a lower interest rate. This could reduce your monthly debt payments and simplify your finances.

• Debt management plan (DMP). Offered by credit counseling agencies, a DMP is a formal repayment plan that might involve negotiating with creditors for a lower interest rate or fewer fees. It's best if you can afford your debt but need help making a plan. Contact the NFCC to find an accredited credit counselor near you.

• Creditor hardship programs. Some creditors offer short-term programs that could help you get back on track after financial hardship. You might be able to get delayed or reduced payments or a lower interest rate. These programs work best if your financial struggle is temporary and you contact your creditors ASAP.

• Bankruptcy. Chapter 7 bankruptcy could help you get rid of unsecured debt if you qualify. Chapter 13 could reorganize your debts and stop foreclosure. Contact a bankruptcy attorney for a free consultation if you're interested in learning more about this option.

What to Look for in a Debt Relief Company

Not all debt relief companies are created equal. You want to make sure you find a reputable company with the experience you need. Here a few things to consider when looking for a professional debt relief company:

• Free evaluation. A good debt relief company won't charge you just to find out if it's even an option. The first evaluation should be completely free.

• No upfront settlement fees. Legitimate debt relief companies won't charge you a settlement fee until negotiations have happened, you've approved the settlement, and at least one payment has been made to your creditor.

• Clear process and expectations. Be wary of companies that are vague about the process and what you should expect. It’s possible to complete a debt relief program in as little as two to four years. Many people settle their first debt within months after starting a program.

• Transparent fee structure. Make sure you know exactly what you'll pay before you sign up. Watch out for companies with hidden fees or that are cagey about costs.

• No false promises or guarantees. Creditors aren't required to negotiate, and no debt relief company can guarantee results. Avoid companies that make too-good-to-be-true promises.

Always research the company's background and reputation. Check with review sites like the Better Business Bureau to find out what real clients have to say.

Take the Next Step Toward Debt Relief

The only way to make your debt go away is to face it head-on, and you're on the right track if you're looking at your options. Qualifying for debt relief doesn't require good credit or barrels of money—you just need to be facing financial hardship.

Ready to take the next step? Call for your free consultation today!