Are you willing to live debt free?

7 options for resolving your consumer debt


Debt can feel paralyzing, even shameful. Thankfully, there are options for you to get financial relief. 


The first option you should consider is repaying your debts on your own. It may seem like a daunting task, but it can be done.


We recommend starting with a budget; figure out where your money is going each month and where you can cut back. Set limits for yourself. Cancel the gym membership you never use. Cancel your cable and get Netflix. Stop eating out. If possible, put yourself on a cash-only diet (no cards = no interest).


Apply the money you save towards your debt. This is not an opportunity to buy something else. The longer you take to pay off your debts results in more money lost on interest. We recommend paying down your debts one at a time. Pick a debt with a relatively small balance and high-interest rate and put all of your extra money towards that account. Keep paying as much over the minimum as possible on one account until that account is paid off. Once the account is paid off, move on to the next one.

Early withdraw from 401(k)

Many people are tempted to tap into their 401 (k) funds to pay off their debt, but before you drain your savings you need to know if you are eligible to withdraw and determine if the taxes and reduced funds are worth it. 


Perhaps the biggest drawback of early withdraw is the penalties and interest you will have to pay. In addition to paying income tax (depending on your income bracket this could be as much as 37%), you will also pay a 10% early withdraw penalty. If you want to pull out $20,000 and you make $40,000/year, you could end up paying a $2,000 penalty, $5,000 income tax, and an additional state tax. After all of the fees and penalties, you would walk away with less than $13,000 to use. Additionally, the extra money you withdraw will be counted as income for the year and it may kick you into a higher tax bracket - resulting in you paying more in taxes for the year. Source


Two more things we suggest you consider is the value of that money if you hadn't withdrawn it and the ramifications of not having that money available when you retire. What is your plan if you approach retirement and don't have enough saved to stop working? That could be a harsh reality to deal with in your late sixties. The older you are, and the more money you take out, the greater that risk is. 


We recommend you consult with a licensed tax professional about withdrawing from your 401 (k). 

Home Equity Line of Credit

If you own a home and have debt, you may consider using a home equity line of credit (HELOC) to pay off your debts with a lower interest rate. Because HELOCs are secured to an asset (your home), they typically offer lower interest rates. 


When you take out a HELOC, you open up a revolving line of credit from your mortgage lender where your home serves as collateral. Lenders will typically set your credit limit by taking a percent of your home's appraised value and subtracting the balance of your existing mortgage. 


While a HELOC may be a great choice for some, it does have some serious consequences you should consider before applying:

  • Payments can be unpredictable. Because HELOCs are variable interest lines of credit, your interest rate (and payment) will increase when federal rates increase. Interest rates rose 4 times in 2018 and are expected to continue rising through 2019. 

  • You put your home at risk. If you use the money from your HELOC and are unable to afford to pay it back, you could be in danger of losing your home. 

  • Fees and penalties. HELOCs can come with annual fees, prepayment penalties, cancellation fees, and inactivity fees. Make sure you read your agreement carefully before signing.

  • Possibly the most important bullet on here. If you tap into your equity for a non-emergency, you risk not having it available for a major life event like a death or job loss.  

Debt settlement

Debt Settlement is the process of renegotiating balances with your creditors. This can be done on your own, with a law firm or with a team of negotiators (like us!). The goal is always to get your creditors to agree to a settlement for a portion of your debt (this should be much less than your current balance) and forgive the remaining balance. Some settlements can be paid in installments, while others are paid through a lump sum payment. 


As the debt settlement company negotiates with your creditors, you stop paying on the accounts involved and instead make a single payment into a federally-insured trust account. Generally, a debt settlement program will offer you a monthly payment much lower than your current minimum payment.


One of the biggest drawbacks in a debt settlement program is that your credit will be negatively impacted and you may be subject to collection activity, such as being sued . That being said, the upside is reducing your monthly payments, reducing the amount you owe and getting out of debt in less time. 



Debt Consolidation

The term 'debt consolidation' has been used to describe many different repayment options over the last couple of years. When we say debt consolidation, we mean using a personal loan to pay off your existing credit cards (or other problem accounts) so that you have only one account you're paying each month. 


While the idea of a single monthly payment and a lower interest rate may seem quite appealing, there are a few things you should consider before jumping in. First, you should do the math on your cards and figure out how long it will take to pay them off at your current payment, then compare that to the term of the loan you're considering. Even at a lower rate, a debt consolidation loan can still cost you more compared to if you just paid your cards down faster.


Second, you should consider what payments are being offered to you with the loan. Are you at least paying that much towards your credit cards now? If it's more, what would happen if you just paid that amount towards to your cards without consolidating? If the payment is less than what you're paying now, you'll likely end up paying more in interest over time. 


Lastly, you should consider what your plans are once you consolidate. Are you going to cancel the cards? If not, you're just adding another creditor into the mix and, like another log in the fire, it's going to keep the debt fire burning. The last thing you want to do is take out a loan, pay off your cards, and charge them up again - then, all you've done is put yourself in a completely worse situation. 


Debt consolidation loans can help a select group of people. We recommend you do the math on your accounts and sit down with a trusted advisor before taking out a new loan. 

Consumer credit counseling

If you are struggling to learn how to use and stick to a budget so you can get your debts paid on time each month, you may want to consider using a consumer credit counselor to help you get on track. 


The majority of consumer credit counseling agencies are nonprofits, and the FTC and NFCC suggest that you work with legitimate nonprofit credit counseling organizations. Nonprofits will offer their counseling services for free or at minimal charges. Depending on your situation, your counselor may recommend a debt management program, bankruptcy, a debt consolidation loan, or simply a better budget.


To prepare for credit counseling, you should block off a couple hours from your schedule to truly focus on and absorb what your counselor can offer you. Credit counselors will ask a lot of questions about your financial situation, so make sure you are prepared. 


Sometimes, there's no other option than to file bankruptcy. We always recommend exhausting every option before pursuing bankruptcy, as it can seriously impact your credit report, insurances, housing applications, employment opportunities, and more. In addition, bankruptcy will stay on your credit report for 10-years and you may have to continue disclosing it beyond that. 


That all being said, still, sometimes it's your only option. There are two common ways to file for bankruptcy - a chapter 7 and chapter 13. 


Chapter 7 is a liquidation bankruptcy, which means the trustee sells off all non-exempt assets held by the debtor (you) so that the debts can be repaid to the fullest extent possible. Chapter 13 bankruptcy is referred to as a reorganization bankruptcy. The goal of a chapter 13 bankruptcy is to reorganize (hence the name) your finances so that you would be able to repay most of your creditors.

Olive Branch Financial is not a law firm and does not offer legal advice or credit repair services.  This information is only intended to provide you with knowledge about your options.  Please speak with an attorney or tax advisor about any options that may involve bankruptcy, legal or tax issues. 

Olive Branch Financial LP

Contact: +1-657-900-5997

Hours of Operation:

7:00 am - 7:00 pm (PST)

Monday - Friday

8:00 am - 2:00 pm (PST)


Off hours available by appointment. 

Closed on Federal Holidays

© 2018 Olive Branch Financial LP | All Rights Reserved.

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Olive Branch Financial is a debt settlement company that operates in some but not all states in the United States, Olive Branch Financial does not accept any clients who do not meet with a consultant for an in-person consultation. If you reside in a state that we do not accept clients in, we may be able to refer you to another company for assistance. 

Olive Branch Financial negotiates unsecured debts on behalf of its clients and does not assume its clients’ debts, make monthly payments to creditors on clients’ behalf, or give clients tax, bankruptcy, accounting, or legal advice. We do not provide credit repair services. Please contact a tax professional to discuss potential tax consequences associated with settling debts for less than the full balance. Please read and understand all of Olive Branch Financial’s Program requirements and Olive Branch Financial’s service agreement before enrolling into Olive Branch Financial’s Program.

The use of debt settlement services will likely adversely affect your creditworthiness, may result in the balances of your enrolled debts increasing due to the accrual of legal fees and interest on your accounts and you being subject to collections actions or lawsuits brought by your creditors. The settlements we negotiate on behalf of our clients resolve the entire account, including all accrued interest and fees. We cannot guarantee that we will resolve your debts and results will vary based on your individual circumstances.