What is a debt relief plan?
A plan that is specifically made for the particular debtor. It helps to distribute the debt burden on the debtor. In this process, the debtor desires to slightly or entirely wave off the debt.
As you can expect how the creditor can allow removing the debt. It has very little chance of happening. So, instead of completely removing debt. DRP convince the creditor to take the payments slowly in pieces. The account holder consents to pay a little and fixed sum after a particular and continuous time.
DRP Debt Relief Plan is a big umbrella. Many plans come under DRP’s shadow. Like debt settlement, debt management, debt restructuring, and many more.
Debt relief plan pros and cons
As debt relief is a better option against filing bankruptcy. Like all other things DRP also has its pros and cons. We are here to discuss the benefits a person or firm can have. But, we also describe some challenges of DRP on the way.
Advantages of having a debt relief plan
Debt relief plan is simple to approve
In the umbrella of DRP, debt settlement & debt management are simple to approve. Both debtor and creditor have to approve a plan. After than debtor will pay a smooth flow of payments consecutively. We are to bust in life and doing multiple jobs. That’s why DRP is a simple process. It is for those who don’t want to be stuck in technicality. Also, want a better financial future.
In debt relief, debt settlement is a fast process
As compared to debt consolidation, and chapter 13 bankruptcy DRP is a better process. It is an easy and fast process to implement.
Debt relief plan is a budgetary plan
It is a cost-effective plan. In this plan, we can reduce the debtor’s debt by 20% to 40%. The official will take a one-time fee for settlement. After that, there might be a reduction in debt. The debtor then just pay a uniform monthly payment.
Debt relief plan has a great success record
In the past couple of years, there are thousands of successful debt relief plan cases. As compared to debt consolidation, and chapter 13 bankruptcy DRP has a greater chance of success. Some are able to reduce the overall debt. Some are able to reduce the payable tax on debt. The issue is that many organizations will not open up about their client DRP success rate.
Some Challenges in debt relief plan
High debt relief plan fee
As these plans are handled by professional firms. These firms charge their fees to had a debt relief plan. On average they will charge you around $500 to $5000. It directly goes into their pockets.
Negative impact on credit score
The relief plans have the public record. If any firm or a person having a debt relief plan. Their information is stored by banks. It will be bad for your credit ratings. Your credit rating will go down. You might not able to open another account in different banks. The rating will show on your bank accounts for several years.
Tax Implications
You can either reduce the tax or can reduce the payable amount. Like you owe the creditor $50,000. The tax is $2000 on it. After the relief plan, the creditor agrees to get $35,000. But you have to pay the tax as a whole. Tax will not go down as well.
If the creditor finds DRP as offensive he/she can take you court.
You need to pay an entirely sizable charge to court and legal counselors for DRP intend to occur.
If you delay your payments, it will give you big time penalties.
After all legal fees and taxation, it is possible you end up giving more than the original debt by creditor.
Your credit rating will hurt a lot, but not as much as a bankruptcy.
