How to Get Out of Debt Without Filing Bankruptcy

By Joyce Starr

  • Overview

    If you are facing a large debt and are having trouble keeping up with it, you know the feeling of frustrated helplessness. Many people feel the dark cloud of untamed debt, lingering above them, so you aren't alone. It's possible to get a grip on things again by following some of these basic steps and hopefully avoid bankruptcy.
    • Step 1

      Set up a budget. You need to look at every monthly expense and how much money is being made each month. The most important expenses will be the ones you need to live on. These are things like rent or mortgage, food, utilities, health care and insurance expenses. By writing everything down, you can see where you are wasting money every month on things that you really can live without. If getting your nails done means you can't pay a bill, then you don't need the nail job.
    • Step 2

      Contact your creditors and tell them about your situation. They may be able to work with you by reducing your payments, setting up a payment plan or setting a lower interest rate on your owed debt. They can't help if you don't let them know what is happening. Most creditors are willing to work with you, if you are willing to work with them.
    • Step 3

      Talk with the debt collectors and try to work out a deal to repay the debt. Most debt collectors will accept something instead of nothing at all. Remember, there are federal laws dictating how a debt collector can go about their business with you. They are not allowed to threaten or harass you. They cannot call your home before 8 a.m. or after 9 p.m. Also, they cannot contact you at your place of employment, if they've been instructed it's not acceptable to call you there.
    • Step 4

      Manage your secured loans, such as a car or mortgage. Talk to the lenders if you are having problems making the payment. If you ignore the payment or the lender's contact, you can have your car repossessed or your house foreclosed on. Most lenders don't want you to default on the debt, because they lose money. If you seem like you're acting in good faith, the lender will more than likely work with you to come up with a solution.
    • Step 5

      Seek out a legitimate credit counseling service to help you create a "get out of debt" plan, if doing it on your own isn't working. They will set up a budget for you, as well as work with your creditors to come up with a solution to repaying your debt. Beware of organizations that charge high fees, promising to fix everything for you overnight. Check with your local Better Business Bureau for reputable credit counseling organizations in your area.
    • Step 6

      Consolidate debt by refinancing your house, if you have sufficient equity in your home. You will be able to pay off your outstanding debts and end up with one payment a month, instead of many. Generally, the lender will pay off any outstanding debts first from the monies that are being borrowed. If you qualify for debt consolidation, your credit score will rise providing you keep current on paying your new loan.
    • Skill: Moderate

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