Texas Debt Relief Plans: How To Get Debt Relief in Texas
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Summary:
Debt relief plans can help individuals manage and reduce their debt, making it easier to regain financial stability. In Texas, there are various debt relief options available, including debt consolidation, credit counseling, debt settlement, and bankruptcy.
Credit cards and other forms of credit have an important place in our lives. After all, they’re an invaluable tool in cases of emergency and they help to build a good credit history allowing consumers to get mortgages and car loans, for example. Unfortunately, it’s also easy to get in over your head with these tiny pieces of plastic. This is especially true when you combine credit card debt with other bills like student loan debt, medical bills, payday loans, and more. This can result in an overwhelming debt burden, which can be hard to overcome without debt relief. Texas is no exception. With about $8,701 in average credit card debt alone, Texas has the fifth-highest amount of credit card debt in the country.
Today, we’ll talk about debt assistance and debt relief options for Texas residents or anyone else struggling with a pile of existing debts.
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Debt relief options
There are a number of ways to achieve debt relief, and one of your best first steps is to meet with a credit counseling agency to come up with some sort of debt relief program. Credit counselors can help you sort through your debt relief options and come up with the best plan for your financial situation.
Debt management program
Nonprofit credit counseling agencies may be able to set you up with a debt management plan, which could significantly reduce the interest rates on your credit cards. This type of plan results in lower monthly payments, making it easier to pay down your debt.
Some of those savings could be applied to your credit card balances so you can pay off your debt even faster. Debt management plans like this typically last from 36 to 60 months, and it’s absolutely critical to at least make your minimum payments each month. Otherwise, you’ll be dropped from the program and your interest rates will go back up.
A debt management plan can be a solid choice for those who don’t qualify for a consolidation loan (or don’t want to borrow money) but need a lower interest rate to pay off their debt faster.
Debt management is also a great way to free yourself of debt without hurting your credit, says Megan DeCrosta, CEO and founder of Cut the Fiscal Fat, which provides financial education to kids, teens, and women in an effort to help end poverty and economic disparity.
“Debt management is always best for your credit. Never let anything go to collections, if you can help it. And ALWAYS communicate with your lender or collector,” says DeCrosta.
Debt consolidation loans
A debt consolidation loan is a good debt-relief option if you have several credit cards and are having trouble keeping up with multiple monthly payments. It’s a means to achieve a better interest rate and only have one monthly payment to manage.
For example, say you have three credit cards with a combined balance of $5,000, each with an 18% interest rate. That means you would pay about $900 a year in interest, give or take, depending on how much you pay each month. Instead, if you consolidate those cards into a single loan with an 8% annual interest rate, you’d only pay around $400 in interest. This, in turn, means your monthly payment will most likely be lower than your previous three combined payments.
A debt consolidation loan is also an excellent choice for people with a lot of student loan debt. It consolidates their loans into one easy payment, which can be easier to budget for and can also potentially lower their interest rate. Just be aware that when you consolidate federal student loans, you may lose some of the benefits and protections they offer.
The only drawback to debt consolidation loans is that it’s another form of unsecured debt (meaning you don’t put up any collateral). This means you’ll need a pretty decent average credit score to qualify for this kind of low-interest loan. To see what you can qualify for with your credit score, use the comparison tool below to find the right debt consolidation loan for you.
Debt settlement companies
Another debt relief option is to hire a Texas debt settlement company. Debt settlement companies will talk with creditors on your behalf to negotiate a lower debt. If you decide to go this route, you’ll end up paying less money on your unsecured debts. However, it may hurt your average credit score, and you’ll probably have to pay income taxes on the portion of money you save.
It’s also important to note that debt settlement companies don’t come cheap. You’ll typically have to pay somewhere between 15% to 25% of your debt, which will cut into your savings. And it’s good to be aware that not every debt settlement firm is on the up-and-up so you don’t fall into a debt-relief scam, advises Leslie Tayne, founder and head attorney at Tayne Law Group.
“If you decide to work with a debt settlement company, do your due diligence. Research the company before speaking to a representative. A quick internet search should bring up reviews from other clients and any legal action against the firm for shady business practices.
“When you speak to someone, make sure to get all of the plan’s terms in writing — including the fees the company will collect,” she says. “If the company isn’t transparent about how it operates, that’s your signal to run. Take the time to carefully review the documentation provided before signing anything.”
To get a better idea of what to look for in a Texas debt settlement company, take a look at those listed in the tool below.
Pro Tip
“If you do consider a debt settlement company, look for one accredited by IAPDA so you know they’re equipped to properly educate and assist you,” adds Josh Richner, the Marketing Director at National Legal Center, a consumer rights law firm with a significant portion of its practice area focused on debt settlement.
The International Association of Professional Debt Arbitrators (IAPDA) is an organization that provides debt settlement training and certification programs. IAPDA is also a member of the American Fair Credit Council (AFCC), which is a national association of debt settlement companies. The AFCC and its members work on behalf of consumers struggling with the overwhelming burdens of unsecured debt to settle those debts for less than their full balance.
Hire a Texas debt settlement attorney
Debt settlement attorneys perform much the same function as debt settlement companies. However, they can be better for some individuals who have more complex debt-relief needs and/or need legal advice in addition to a debt relief program. For example, those who have a judgment against them or are considering bankruptcy might want to seek a debt settlement lawyer.
“Debt settlement companies often do not provide the same level of expertise or guidance as an experienced law firm. A law firm specializing in debt settlement and bankruptcy can offer more comprehensive advice regarding your unique situation, as well as help with negotiation strategies,” explains Richner. “A debt settlement company absolutely can help, but their services are limited and they cannot offer legal advice. They can’t use legal strategies to resolve your debt, they can only negotiate a settlement.”
Credit card debt forgiveness program
The credit card debt forgiveness program, which not everyone is eligible for, is basically a mix of debt settlement, debt management, and debt consolidation. It’s a program developed by the National Foundation for Credit Counseling (NFCC), which can forgive up to 40% to 50% of your credit card debt in exchange for a three-year debt repayment program.
There’s no interest rate charged on the remaining balance, but it must be completed within 36 months and you can’t be late on even one monthly payment. Texas residents can call a credit counseling agency in their area to check for eligibility. However, there are four basic requirements they must first meet.
- The creditor must be on the list of credit card companies, banks, law offices, or debt collection agencies that agreed to participate in the program.
- The account must be closed to further charges, meaning no payments have been made in 120 days or more.
- The balance on the account must be at least $1,000.
- The balance must be paid off in three years — no extensions allowed.
Home equity loans or home equity investments
If you own your own house, you may be able to leverage the equity you’ve built up in your home to get out from under your credit card debt or other debts. There are basically three ways you can do this. You can get a home equity loan or a home equity line of credit (HELOC), which both use your house as collateral for the loan, or you can seek out a home equity investment firm.
Chances are, if you’re in need of debt relief in the first place, you may not have a very good credit score, which is usually required for a home equity loan or HELOC. But a home equity investment, also known as a shared equity agreement, might be a good debt-relief option because it has less stringent credit requirements and won’t put you any further in debt.
Essentially, home equity investments allow homeowners to sell off a portion of their home’s future equity for a lump sum of cash. It’s not a loan, per se, so there are no monthly payments or interest charges, and you won’t have to pay the money back until you sell the house or the contract is up.
Get a balance transfer credit card
If you haven’t missed any payments on your credit card, you may be able to qualify for a balance transfer credit card that comes with a 0% introductory interest rate. Usually, the interest rate is good for a year to 18 months, which might be enough time for you to pay off your credit card debt without incurring any more interest charges before the introductory period is up.
Keep in mind how critical it is to always at least make your minimum monthly payments on these types of credit cards. If you miss even a single monthly payment, not only will it hurt your credit scores, but it will likely jack your interest rate up to 20% or more.
File for bankruptcy
Bankruptcy should pretty much be your last resort, but it may be your only option if you have no other way to pay your debts. If you do need to declare bankruptcy, keep in mind that bankruptcy stays on your credit report for seven to 10 years. This will basically prohibit you from getting a credit card, mortgage, or other any other kind of credit without needing a cosigner.
If you do declare bankruptcy you’ll probably want to hire an attorney who has experience in this area. However, if you live in Texas, you can actually file without a lawyer to save yourself some money. Whether you have an attorney or not, though, you’ll need to take a Texas-approved credit counseling course with an accredited credit counselor before you file. You’ll also be required to complete a debtor education class after you’ve filed.
Pro Tip
Be sure to take advantage of the initial free consultation that many debt settlement and debt consolidation companies offer. It’s basically a free debt analysis that can help you gain a better understanding of your debt-relief choices.
Programs for Texas residents having financial hardships
Texas residents in need of other types of financial assistance may find relief with local, state, or federal programs, such as the following.
- SNAP. The Supplemental Nutrition Assistance Program (SNAP) is a federally funded program that can help provide food assistance to low or no-income individuals and families. In Texas, if you qualify, money is loaded onto a Lone Star Card, which can be used at participating locations just like a debit or credit card.
- TANF. Temporary Assistance for Needy Families (TANF) is meant to help families with children who are 18 years of age or younger who need cash assistance for food, clothing, shelter, and other necessities.
- WIC. The Women, Infants, and Children’s Program (WIC) is a nutritional program designed to help low-income women, pregnant women, and children up to five years of age.
- CEAP. The Comprehensive Energy Assistance Program (CEAP) is a program to help Texans with utility bills and immediate energy needs.
- Mortgage and rental assistance programs. If you are struggling with mortgage debt or in danger of foreclosure, Texas has programs that can help with mortgage or rental assistance and avoid foreclosure and eviction.
FAQs
What is Texas’s average auto loan debt?
It may be a cliche, but Texans love their cars and trucks. As of 2022, they also tend to carry the highest average auto loan debt in the country at $7,270. By comparison, the national average for auto loan debt in the country is $5,210. Surprisingly, Hawaii has the lowest average car loan debt at $3,970.
What is Texas’s average mortgage debt?
The national average mortgage debt is $220,380. In this case, Texans fall well below the national average with an average mortgage balance of $199,871.
How do you qualify for Texas debt relief?
Depending on the type of debt relief program you apply for, the qualifications can vary greatly. For example, anyone with a good credit score can qualify for a consolidation loan. Other debt relief programs, however, may require you to prove significant financial hardship in order to qualify.
The fastest way to find out is to talk to a credit counselor, find out which programs you qualify for, and get started on a path to debt relief.
Does debt relief destroy credit?
Some types of debt relief programs can hurt your credit, but not necessarily. For example, if you’re struggling with consumer debt but still making your minimum monthly payments and continuing to pay your credit card bills, your credit scores shouldn’t be negatively impacted (or not by much). Your payment history is one of the most heavily weighted factors on your credit report.
On the other hand, if you use a debt settlement firm to negotiate a lower repayment amount, your debts have been sold to a collection agency, or you declare bankruptcy, your credit scores will take a hit. Bankruptcy will cause the most damage to your credit because it will stay on your credit report for seven to 10 years.
Key Takeaways
- Texas residents seeking to get out from under credit card debt or become debt-free should consider debt relief programs. These include debt consolidation loans, debt settlement, or a debt management plan.
- Nonprofit credit counseling agencies can give Texas debt holders the insight and information they need to choose the best debt relief option for them.
- Some debt relief programs will impact your credit scores, such as debt settlement or bankruptcy. However, consolidation or other loans can get you debt-free without hurting your credit.
- It’s important to carefully research debt settlement companies before committing to a debt settlement plan to avoid falling victim to debt relief scams.
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