Proven Methods for Getting Out of Debt

There comes a point where a consumer decides it is time to find help in dealing with mounting debt. When that consumer goes looking for help in getting out of debt, he finds that there are several options from which to choose. The way to maximize your debt elimination plans is to work with a proven method for getting out of debt.

Budgeting

The most effective way to compare your monthly debt with your monthly income is to create a budget. A budget helps you to organize your debt and find ways to cut down on your expenses. When you analyze a budget and find ways to reduce your monthly spending, you apply that extra money to paying down your debt. You can create a budget using a pen and paper, or a computer spreadsheet. List all of your monthly bills, including expenses such as food, and compare that to your income. Do a detailed listing of your expenses for a month, and then see where you can save money. Cutting coupons for your groceries and taking your lunch to work instead of buying it every day could free up enough to pay off your debt in a few years.

Debt Consolidation

Debt consolidation is the process of taking your high-interest debt and bringing it under one single low-interest monthly loan payment. You reduce your debt immediately by lowering your interest payments and by replacing multiple service charges with one service charge. The savings could be hundreds of dollars a month. You apply that savings to your consolidation program and pay your debt off faster. You can create your own consolidation program by using a personal loan, a home equity loan, a home equity line of credit or by transferring your multiple balances to one credit account. If you would prefer help in consolidating your debt, you can contact a debt consolidation professional.

Debt Counseling

Some consumers find themselves in financial trouble because they cannot create and follow a monthly budget, or they are unaware of debt management options such as consolidation. In this instance, it is best to contract the services of a debt counselor. A debt counselor works with you to determine the best way to pay off your debt. You are required to pay a fee to a debt counselor, so be sure that the fees added to your debt management program do not prevent you from being able to pay your debt off within the time you want.

Bankruptcy

Bankruptcy is a proven method for getting out of debt that you should only use as a last resort, according to the Federal Trade Commission website. There are two types of consumer-related bankruptcy available: Chapter 13 and Chapter 7. If you have a steady income then you may qualify for a Chapter 13 bankruptcy, which allows you to keep your property while paying on a court-ordered debt management plan. As soon as you finish paying on your debt management plan, the court discharges your debts. A Chapter 7 bankruptcy requires you to liquidate all of your assets except for those that are exempt. Examples of exempt property include vehicles and some home furnishings. The court sells the rest of your assets and applies this money to your debt. You have to wait eight years for the court to discharge your debt.