How to Get Out of Debt

An overview of ways to deal with credit card debt.

Difficulty: Moderately Challenging

Instructions

1. Prioritize your debt. While it is good to pay all of your creditors, if you cannot, you need to choose which to pay. Always pay your mortgage/rent first! Follow with utilities, food, car payment and credit cards last.

2. Look into debt consolidation for your credit card debt and personal loans. Be careful with this. Some companies are scams. You are looking for a company that will pay off the debt and give you a loan for the amount at a lower interest rate. Try to avoid a second mortgage to accomplish this goal. Try a company like Primerica. This usually will not help with student loans

3. If you have poor credit, you may benefit from filing bankruptcy. If your income is low enough, your local legal services may help you file for free. Bankruptcy will wipe out your debt (excluding debt owed to the government, student loans, back alimony/child support) but will remain on your credit report for 10 years. This can hamper the ability for you to get a car loan, mortgage, or credit cards.

4. If you are uncollectable (you make little money or your income is government assistance) creditors will not be able to garnish your wages for the amount of the credit card debt. Therefore, you can stop paying your creditors and while they can take you to court, they will not be able to get any money from you.

5. Try transferring your debt to a credit card that will offer 0% interest for six months to a year. This will give you time to pay them down with out the huge interest rate. Make sure you know what the interest rate will be once the grace period is done.

6. If you have a good credit score, try to get a low interest rate personal loan. Use the money to pay off your debt. It's like debt consolidation without dealing with the third party.

Tips & Warnings

• Watch out for people who prey on those with high debts. They make great promises that usually won't come true. Freedom from debt does not happen overnight.

[melly1143]

on 10/11/2009 Sites such as the one below are not recommended. Many debt companies who help eliminate debt charge a large fee. You can negotiate with your creditors yourself for a smaller payment or total amount due and there is no need to pay a company to do this for you.

[moonsun55]

on 9/4/2009 Good info.

[respectfully]

on 9/2/2009 THanks so much on this article. These economic times are so bad that you just dont know how to do it all. These kids have a rouch road if we as parents or adults dont know where to begin. great help. 5* rec

[jenbeth]

on 8/22/2009 Great advice, thanks for the help.

[athomemommie]

on 8/22/2009 Great info thank you!