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How to Get Debt Relief in Colorado

Dena Standley | October 19, 2022

You can find the debt relief you need.

Summary: If you're struggling with debt in Colorado, SoloSuit can help you find the relief you need.

>>Read the NPR story on SoloSuit

If you are in financial distress, various debt relief solutions may have crossed your mind. You may also wonder what options are available to you as a resident of the Centennial State.

Like other American consumers, Coloradoans have several options they can use to get out of massive debt. Before deciding which direction to take, it is essential that you know how each option works, its pros and cons, and if it's the best fit for your situation. Your debt relief options include:

  • Debt settlement
  • Debt consolidation loan
  • Debt management plan
  • Debt relief by filing for bankruptcy
  • Debt forgiveness
  • Debt relief programs in Colorado

One of these options may work for you depending on the amount of debt and how late you are on each account. In this article, we will explore each option and its pros and cons.

Let's jump right in.

Consider debt settlement

There are two ways to settle a debt. You can do it yourself, or you can choose to hire a debt settlement company. If you go with the latter, they will advise you to stop paying your creditors and open a "savings account." After that, you will deposit the money you would have used to pay the creditors.

Next, hand over control of the account to the debt settlement company, and they decide how to pay the creditor or debt collector. In the meantime, all your accounts are delinquent until the company negotiates a settlement plan.

Ideally, debt settlement should take the creditors or collector off your back and help you get out of debt faster. However, that's not usually the case. Depending on the company's policies, they may stretch the repayment timeline longer than your initial period, keeping you in debt.

Debt settlement is a great way to reach a settlement that is less than the original amount you owed. For example, most original creditors are willing to settle for anywhere between 20%-70% of the original debt amount. On the other hand, debt collectors may settle for as little as 1%–60%. Debt settlement companies know how to negotiate the amount to fit your financial circumstances.

If you choose debt settlement, you may need to pay tax on the amount forgiven, as the IRS may consider it taxable income. Beware of all the potential repercussions of settling a debt, whether it involves taxes, your credit score, etc.

If you don't want to use a settlement company, you can go the DIY way. Call your creditors to make an offer starting with the smallest debt and working up the ladder. Negotiate for as little as thirty cents on the dollar. The advantage of self-settlement is that you save on hiring fees. The process is tiring, but it will be worthwhile when you are debt-free.

Take out a debt consolidation loan

Taking a debt consolidation loan means you calculate the total unsecured loan you owe and then take out a new loan for that sum to clear your arrears. Ideally, the new loan should have a lower interest for you to save some money.

Consolidating debts is not a quick-fix debt relief option, although it may give you some sense of relief. You do not get out of debt but transfer your debt from several creditors to one. Consider the pros and cons of debt consolidation.

On the one hand, it's great because it can help you feel more organized when dealing with only one account instead of several, and if you get a loan with lower interest than your current rates, you will save money in the long run.

On the other hand, utilizing the debt consolidation method doesn't make your debt disappear, and paying credit with credit can get you into a continuous borrowing cycle.

The debt consolidation loan can be a new credit card with an introductory 0% Annual Percentage Rate (APR), a personal loan with a lower interest rate, or a 401(k) loan.

Create a debt management plan

Credit agencies specialize in creating personalized plans to help you get out of debt. You make a single monthly payment to the agency, and they distribute it among your creditors. Credit counselors work with credit card companies to negotiate debt on behalf of overwhelmed clients. Their services are not free, so you need to factor in the costs.

Some debt counseling companies have been accused of involvement in fraudulent activities. Therefore, before you engage a credit counseling agency, make sure they are accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). You can also check the Fair Trade Commission's website for any red-flagged companies.

Debt relief by filing for bankruptcy

You may cringe when you think of filing for bankruptcy. However, bankruptcy can be the new beginning you desperately need if you are underwater financially. When you apply for a chapter 7 or a chapter 13 bankruptcy in Colorado, your debtors have to stop collection attempts immediately. They can not sue you for debt and have to stop wage garnishments.

Your assigned trustee will use every means possible to pay off as much of your debt as possible. The implication is you may lose most or all of your non-exempt property. You may also not access loans with friendly interest rates after applying for bankruptcy. If your goal is to start over, the bankruptcy process may be a necessary evil.

Request for debt forgiveness

Asking for debt forgiveness from your creditor is a long shot. It's worth a try, though, if you are in a tight spot. You will need to talk honestly and humbly with your creditor explaining your situation. In addition, open up about personal matters such as health issues, loss of job, and family problems. If it works, you can get a new start financially. There may be tax implications on the forgiven amount as with debt settlement.

Requesting for debt forgiveness has no guarantee. However, if your situation is hopeless and you want to avoid a bankruptcy application, this may be your last attempt before giving up.

Many Coloradoans struggle with increasing debt. If creditors and debt collection companies are giving you sleepless nights, one or more of the debt relief strategies may work for you. You can also get help with all matters of debt on the SoloSuit Blog.

Where to find debt relief programs in Colorado

Colorado offers non-profit debt consolidation and credit counseling services. Visit InCharge to explore this option and talk with a counselor about debt consolidation possibilities.

Colorado also offers the PEAK website to help you explore state and grant assistance programs, as well as federally funded rent vouchers for low-income residents. Explore this option to see if you qualify for assistance that may help relieve some of the financial burdens.

SNAP benefits, formerly known as food stamps, is designed to help people undergoing severe financial hardships buy food. Visit the Colorado Department of Human Services for more information.

If you are facing foreclosure, Colorado has established a hotline service where counselors will help you explore your options to avoid losing your home.

No matter the type of debt you are facing as a Colorado resident, you can find the relief you seek. If you've been sued for debt, SoloSuit's free Answer form can help you respond to the lawsuit and win in court.

What is SoloSuit?

SoloSuit makes it easy to respond to a debt collection lawsuit.

How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.

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"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James

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