With few jobs available, many young people find themselves taking low-paying jobs just to pay the bills, but still coming up short every month. Accumulating a large amount of debt is easy, yet paying it off is difficult. Here are a few steps you can take to get help with your debt — and create your own debt ceiling:
Debt Settlement
There are several debt settlement companies that can call all of your creditors and work out settlements for you. Typically, part of your debt will be forgiven. Some credit card companies are willing to reduce the amount you owe by 50 percent or more.
Be careful when choosing a company, because you will likely have to pay for their services. Keep in mind that debt settlement can have an impact on your credit for years, but it likely will help you in the long run since the debt will be paid off.
Payment Plans
If you're having trouble paying your bills, call your creditors to let them know what's going on. Some of your creditors may agree to reduce your interest or payments. A payment plan may allow you to free up extra income to pay off other bills. Depending on the company, though, payment plans may only be available if you are past due.
Offering the creditor a lump sum of cash to settle the debt on your own may also be possible, if you can free up cash from your retirement plan to put toward the debt. Selling an annuity to get immediate cash is one way you might be able to get a jump start on repayment.
Consumer Credit Counseling
Consumer credit counseling is a great option if you have trouble creating a budget. Counselors will review your debt and income, contact your creditors to negotiate payment plans and collect the total amount for the payment plan from you. They will then make all of the payments to your creditors.
Consumer credit counseling is another situation where you need to choose the company wisely. It is always a good idea to fully research the company before signing up with them.
Bankruptcy
You may consider bankruptcy if your finances are completely out of hand. Depending on your situation, you may be able to have many of your debts discharged (Chapter 7) or pay back a majority of your debt over several years (Chapter 13).
Due to changes in bankruptcy laws in 2005, filing for Chapter 7 may be more difficult due to median income requirements. You must also meet with an approved credit counselor within six months before filing.
Bankruptcy will also affect your credit. Depending on the option you choose, it may stay on your credit report for seven to 10 years. Bankruptcy is a big decision with long-term effects, so make sure you have fully explored all other options before choosing this path.
Take Charge
There are many options to help you get out of debt, but the first step you must take is to stop creating more debt. Stop relying on credit accounts as income, and find ways to reduce your monthly expenses. It may be a long journey, but the end results are priceless.
Alanna Ritchie has spent years studying, writing and learning to love the intricacies of the English language. Today, she works as a content writer for Debt.org, where her primary focus is personal finance.
