How to Become Debt Free Without Filing Bankruptcy
It's the American dream to have everything--the house, the car and all the toys to go along with it. But what about all that debt you accrued along the way? More and more Americans are filing for bankruptcy each year. Some are trying to live well above their means, while others are just trying to live. However, there is an alternative to this vicious cycle. With a little discipline and hard work, you can become debt free while still enjoying life.
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Instructions
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Consider debt settlement. Resorting to settling your debt with a debt settlement company is a great first step toward financial freedom. Debt settlement companies work on behalf of you, the consumer, to help you save as much money as you can while paying off credit card debt. Debt settlement companies will negotiate on your behalf with credit card companies, sometimes saving you as much as 50 percent off your outstanding debt. This is considered to be one of the least-expensive and quickest ways to becoming debt free without the hassle of bankruptcy.
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Consolidate your debts. There are many consolidation companies out there willing to help you get out of debt so you don't have to file for bankruptcy and ruin your credit. Debt consolidation companies or credit counseling companies work with your credit card agencies to lower your interest rates. Usually these companies are non-profit agencies that require a small monthly fee. This program may work for some people, but unlike debt settlement, credit counseling agencies work with you so you can pay off the debt in its entirety.
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Pay off bills little by little. This is recommended by financial experts such as Dave Ramsey, which he calls the "Debt Snowball." He recommends that you start paying off the smaller bills first and pay the ones you can afford to pay off right away, working in order of outstanding balance from the lowest to the highest rather than working on the highest interest rate to the lowest. This alternative helps you organize and prioritize your bills and budget. Of course there are a few exceptions, like your home mortgage, which should be paid monthly as well as other real estate-based loans. If you have similar balances, he recommends you pay the higher interest rate first.
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Pay in cash only. If you are at a point in your life where you can make payments on your debts and still have money available for other expenditures, use cash only. This may require you to lock your credit cards up in a safe or to cut them up so you are not tempted to use them anymore.
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Downgrade your life. It may not be fun, but it may be necessary. Have a yard sale and set out your big ticket items. This is a great way to get quick money to start paying off debts. If you have two or three cars, consider selling one and paying off one of your credit cards with the money. Try using online auction sites like eBay to sell electronics, jewelry or other personal items. Then learn to live a downgraded lifestyle so you stop spending so much money on unnecessary things.
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Tips & Warnings
Filing for bankruptcy is not an easy alternative anymore. In most cases, even if you file for bankruptcy, you are still required to make some type of payment arrangements to pay off your debt.
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Comments
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hope002
Jan 29, 2010
This article gives a good overall depiction of some of the many oppurtunities consumers have to tackle their debt problems. I would urge folks with loads of debt to explore their options given the down economy and more directly the implications of this down economy. Banks are much more willing to settle debt then they have been in a long time.
