Government Debt Relief - Is It An Option?

Highlights

  • Government debt relief programs are limited, but options exist.
  • The Government also helps protect you against debt collectors.
  • There are non-government programs to help you get out of debt.
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/5.0
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Tips and Advice to Find Government Debt Relief and Grants

Drowning in Debt? Not sure how to get out of debt?

Do you think that the government is the best place to turn to get out of debt? While it is true that there are some limited government debt relief programs, don’t count on the government to bail you out.

Does government debt relief exist? If so, what exactly are your options?There are some misconceptions about what the government can actually do to provide debt relief. In short, the federal government does have assistance programs and grants, but there is no such thing as a straight-forward debt relief program issued by the government where your debts disappear magically.

The US government has racked up close to $20 Trillion in debt...that is serious debt. Seriously, that looks like a steep hill to climb.

Government Debt:Total Public Debt

 Source: U.S. Department of the Treasury. Fiscal Service, Federal Debt: Total Public Debt [GFDEBTN], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GFDEBTN, August 27, 2017.

It is important to get a grip of your debt situation. In general, any government program will aid those in a hardship, although not everyone in a financial hardship will qualify for a government debt relief program. It is good to keep in mind that government debt relief is not a solution for many debt problems, especially with unsecured debt, such as credit card debt. However, it is also a good idea to know your rights and what type of help is available.

In order to understand how the government can help you find the best debt relief solution for your personal situation learn about:

  • Handling Debt and tips from the government
  • Government Debt Relief for Different Types of Debt (Student, Mortgage, Medical/Hardship)
  • Government Protection Against Debt Collectors and Lawsuits

Suffering from financial hardship? Don't wait for a magical Government Debt Relief Program

Many consumers are falling behind on their credit card debt. Unfortunately, there is no magical Government Debt Relief program. If you are in a financial hardship and have unsecured debt, then Get a free debt consultation from a BIlls.com debt provider.

Pre-Debt Relief: Tips From the Government

While the government is not managed like a household there are certain principles that must be maintained, including keeping a budget, balancing your budget, bringing in income, taking out debt that can be serviced, and building equity.

Naturally, you don’t have the luxury of printing out money, issuing a bond, or managing interest and inflation. However, if a government does not handle its finances prudently it will find itself in a state of insolvency.

Here are some useful tips to manage debt:

  1. Keep a budget: If you need help setting or managing a budget, then check out Bills.com Budget Guide.
  2. Balance Your Budget: If your income isn’t covering your expenses, then you can try to cut your expenses, or alternatively increase your income by taking an extra job, or working extra hours.
  3. Choose Debt Wisely: If your income isn’t sufficient to manage your expenses, then a loan can be a way to bridge the gap. Try to focus on healthy debt that builds your net worth, such as mortgages and student loans, just as the government takes out loans to build infrastructure or long-term national projects.

If you plan your finances, monitor your budget, take out healthy debt, build up emergency savings, and then you can possibly avoid getting into debt trouble. Even if you are suffering from a financial hardship and racked up debt, good financial habits will always come in handy.

Government Debt Relief for Different Types of Debt

There are specific government programs to help consumers in debt. Since mortgages and student loans are two of the biggest household debts, it is no wonder that the government has intervened to help in times of crisis.

 Government Debt Relief for Mortgages

One of the most popular debt relief programs for mortgages was the Making Home Affordable program. This included various foreclosure alternatives including:

  • HARP Mortgage - The HARP mortgage allows underwater borrowers who lost equity in the Great Recession to refinance into lower interest rates and affordable payments. The HARP program has helped over 3.4 million borrowers. The HARP program was recently extended until 2018, however it does have eligibility requirements including Fannie Mae and Freddie Mac loans originated before June 1, 2009.
  • HAMP Modification - The HAMP modification expired, but set the way for lenders to renegotiate government backed loans into affordable payments. With the end of the program, lenders are expected to pick up the slack and offer their own modification programs.

Government Debt Relief for Student Loans

The second biggest consumer non-housing debt in America is student loans. As of Q2 2017 Student loan debt had reached $1.34 billion. Student loan balance tripled in the last 17 years (between Q1 2003 - Q2 2017) and now comprises more than 32% of all non-housing debt.

Student loans can be a heavy financial burden, making it more difficult to save money, build up a down payment for a home, or just make ends meet. Currently, most student loans today are federal student loans, which are often eligible for various government student debt relief programs.

If you are struggling with your federal student loans, then you should consult your loan servicer. Also, refer to the excellent student aid government website

If you are having short term problems, then consider a deferment or forbearance plan. However, if you are struggling with payments, then consider a loan consolidation, loan extension, Income-Driven Plan, Income-Sensitive Plan. There also exists certain loan forgiveness plans.

Government Debt Relief for Medical and Hardship Situations

While there is no universal program to help with personal debt, there are a number of local programs to help people in financial hardships. One of the main sources of financial hardship is due to illness and medical bills. Not only do people lose income, but medical debt can be very expensive. Left with no recourse, many people use up their savings and even run up credit card debt to pay medical bill and get medical care.

The government has a website to help with medical and other bills. You can learn about state and federal health insurance programs that may offer help with paying for bills or payment options. Here are some other areas that the government can offer relief: Paying for Telephone Service, Home Energy Bill, Medical Bills, Prescription Drug Costs, and Welfare or Temporary Assistance for Needy Families (TANF).

The government also provides information and programs about medical debt on their website https://medlineplus.gov/financialassistance.html . As the saying goes: "an ounce of prevention is worth a pound of cure." While much of the information does not help with past debt, by arming yourself with knowledge, it may be possible to avoid some of the medical debt.

Talk to Your Creditor

Anyone with secured debt (mortgages and auto loans) should speak to their creditor as soon as they have a problem. Try to work out a plan that allows you to make your payments on time.

Government Protection Against Debt and Debt Collectors

One of the biggest government debt relief programs is the legal protections that it offers. This includes the Fair Debt Collection Practices Act (FDCPA), which limits the actions of debt collectors. If you are behind in payments, then the last thing you want to face is harassment from a debt collector. The FDCPA prohibits debt collectors from very specific behavior including the use of abusive or threatening language, and threats of arrest. 

Another area that the government offers debt relief is through collection laws and statute of limitations. These offer you protection in the case of a lawsuit and a potential judgment. These laws are both state specific and relate to the type of debt and assets.;

One final area that the government offers debt relief is through a court approved bankruptcy, either a Chapter 7 liquidation, or a Chapter 13 court payment plan. Bankruptcy is generally considered a last-resort solution and not many people can qualify for a Chapter 7 bankruptcy or complete a Chapter 13 bankruptcy.

Good News: Alternatives to Government Debt Relief Options

The good news for many people in debt is that there are a number of debt relief options that don’t include the government. There are solutions for people in good financial shape and for those in a financial hardship and struggling with credit card debt.

Anyone with a good financial situation and good credit should look at their budget, assets, and credit. Perhaps paying off debt more aggressively or taking out a debt consolidation loan will solve your problems.

However, if you are struggling to make your minimum payments, and want to focus on paying off your debt and not your credit, then consider a debt settlement program. Fortunately, the industry is regulated by the government, so you never have to make any upfront payments. Private industry, with firms such as BIlls.com sister company Freedom Debt Relief, now offer you debt relief in cases where the government cannot help.

Need Help Finding a Non-Government Debt Relief Tactic

Is Government help not enough? If you are still not sure which debt relief tactic is best for your situation, then check out BIlls.com innovative tool, the Debt Navigator. With just a few questions and a soft pull on your credit, you can get a free personalized solution to help you get debt free.

Get Debt Help!
4.6
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(31 Votes)

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32 Comments

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  • JA
    Jun, 2014
    Jillian
    Hershey, PA
    Are there any cash loans for bad credit that can help pay a car loan?
    0 Votes

    • BA
      Jun, 2014
      Bill
      Not many lenders will want to lend you money if you cannot afford your existing car payment. Speak to your auto finance company about refinancing the loan so that it has a longer term, which will lower your monthly payments. The downside to this strategy is the lifetime cost of the loan will be higher.
      0 Votes

  • DC
    Feb, 2014
    dwpuchi
    Freeport, NY
    I will love to recive in spanish this information I understood but some time I kind express fluent english... thanks You are great and gave me hope again... thanks
    0 Votes

  • MM
    Feb, 2013
    Marvin
    Houston, TX
    I've received a few emails with information about a special "Obama refinance program" that could lower my interest rate. Do you know what they're referring to?
    1 Votes

    • BA
      Feb, 2013
      Bill
      What you received was a marketing email that was stretching the truth. There are some different programs such as the HARP program and FHA and VA refinance program that could lower you interest rate, depending on your current loan's rate and your ability to meet eligibility requirements. However, there is no specific Obama refinance program. The closest thing to it is the #myrefi program, which is a proposal by the President to expand refinancing opportunities.

      If you have not refinanced recently, rates are near historic lows and you should see if refinancing will save you money.
      1 Votes

  • BR
    May, 2012
    Bobby
    Middletown, OH
    We have an interest only loan, we owe more than what the home is worth. We asked our mortgage lender for a loan modification and they turn us down. What can we do we tried to refinance, lenders said we owe more than home is worth. Need help fast!!!
    1 Votes

    • BA
      May, 2012
      Bill
      Bobby, your options depend on whether your loan is backed by Fannie Mae or Freddie Mac. If it is, look into the HARP mortgage program.

      If not, there are not a lot of options. You can speak with a HUD approved housing counselor for free, at 888-995-4673. You can also keep following the news, as there is talk about expanding the HARP program to loans not backed by Fannie or Freddie.
      1 Votes

    • BR
      May, 2012
      Bobby
      Middletown, OH
      Will HAMP help with our problem with an interest only loan?
      0 Votes

    • BA
      May, 2012
      Bill
      Bobby, the reason I suggested you call HOPE NOW is a HUD-approved housing counselor can speak to you about the HAMP program, discussing whether you qualify for a loan modification.
      1 Votes

  • PW
    Aug, 2011
    Phillip
    Terrytown, LA
    I have a question, I currently work in local law enforcement agency. So needless to say my pay is not the best. I recently got married, and my wife had over 100K in student loans, +60K was in private and the remaining in federal. So just in her student loans I am now shelling out and extra 1K a month to pay just on that. Now she got her loans before we even got married. Am I actually held liable for these loans or could they (Loan Company) come after me for late payments or non-payments because we are married? As of late, I was forced to pick up extra work just to make ends meet. My actual take home pay is 2,200.00 a month. My house note is now +1500.00 a(was 1,200.00) month due to the increase of insurance. I was wondering if there are any relief programs out there for student loans Private or Federal? I am trying my best to keep up with the debt like a responsible bill payer should, but I can't always bank that the extra work will always be available for me to work/earn. I am sure one of your question would be "did you look into consolidating your loans?" The answer to that is yes, according to my wife. she claims she did look into it but there was nothing out there that would help. Thanks to this current economy being in such bad shape. My wife is still unable to find a job in her field of study. So, If there is any insight you could provide it would be greatly appreciated.
    0 Votes

    • BA
      Aug, 2011
      Bill
      Consult with a lawyer in your state to learn exactly what liability a spouse has, if any, for one spouse's pre-marital debt. In general, in common-law family-law states, spouses do not have liability for the other spouse's debts. In community property states, the answer to that question is much murkier.

      Has your spouse looked into a deferment or forbearance?

      You mentioned working in law enforcement. There are student loan cancellation programs available for people working in public service, but these programs are not transferable to the public servant's spouse.
      1 Votes

    • RS
      Nov, 2011
      Ry
      Weare, NH
      No one can go after you for students loans incurred by your wife prior to your marriage.
      0 Votes

    • BA
      Nov, 2011
      Bill
      Not so fast. In some community property states, community assets can be pursued if a spouse becomes delinquent on a debt and the creditor receives a judgment. In California, for example, the separate assets of a judgment-creditor's spouse are fair game for liens.

      It is rarely a good idea to make blanket statements about consumer legal rights and liabilities.
      2 Votes

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