You’re being pulled down by debt and you wonder what, if anything, can the government do to provide relief. You hear about government assistance for many other things, but is government debt relief a viable option? Well, let’s look.
The Issue
Yes, Uncle Sam does offer some narrow debt relief programs, much of it the form of assistance programs and grants. Still, don’t depend on the government to save you from your financial obligations. The fact is that a government program that will make your debts go poof! simply doesn’t exist.
Government Suggestions to Keep You Debt-Free
It’s not good for the economy for you to need debt relief, so the federal government offers some pointers to keep you from reaching that point.
- Establish and hew to a budget. Yes, that old bugaboo. You really, truly do need a budget to help you know where your money’s going and ensure that you will always have sufficient cash for what you need. A budget will also help keep you out of debt.
- Make sure to balance the budget. You want your incoming and outgoing cash flow to line up. If you aren’t bringing in enough to take care of your costs, you can either slash expenses or find ways to bring in more cash, perhaps through a part-time gig or a hobby you can monetize.
- Choose healthy debt. If you just need to and you’re qualified, you can take out a loan to tide you over. This kind of debt makes sense and can help you build your credit portfolio.
- Create an emergency fund. This is so you don’t have to whip out the plastic every time there’s an emergency such as a car repair. Aim for six months to a year of living expenses, but even three months will help.
Homeowner Debt Relief
The HARP mortgage program was popular but sadly it expired. It was, however, replaced by Fannie Mae and Freddie Mac with special refi programs. The HAMP modification program also expired, but that opened the door for lenders to renegotiate government-sponsored into more-manageable payments.
Student Loan Debt Relief
Did you know that most student loans are federally backed? They are, and they frequently qualify for a myriad of government debt relief programs. If you need help, ask your loan servicer, or check out studentaid.gov/h/manage-loans. If your struggles are temporary, you might want to consider a forbearance plan or deferment.
Financial Hardship Relief
The government does provide help for medical and other types of bills. You can get assistance for food, utilities, medications. You may want to go to the government’s MedlinePlus site for info about help with healthcare debt.
Relief Through Bankruptcy
Yes, this financial strategy of last resort is offered by the government. There are two kinds of court-approved bankruptcies: Chapter 7 or Chapter 13. Be careful here, though: such a filing can stay on your credit report for seven to 10 years. If your financial problems are severe, you may be better off using another option such as credit consolidation or debt settlement.
So, is government debt relief a viable option? Well, it all depends on your needs. But as you can see, there’s nothing that will magically wipe your debts clean, other than bankruptcy, and even that’s not cut and dried, and you should still try to avoid it.
Whatever financial option you choose, be sure to learn to practice good financial habits so that you’re never in this position again.
