Debt Repair Programs

The simplest way to repair your debt is simply to pay it off. Consider ranking your debts starting from the smallest to the largest, and paying them off one by one, even if that means taking a second job or cutting back on unnecessary expenses. If that doesn't work for you, several other options are available, but most will require that you pay back at least some of what you owe, and the process could take several years to complete.

Bankruptcy

Bankruptcy is the most extreme form of debt repair. With Chapter 7 bankruptcy you can eliminate all your unsecured debt--such as credit card debt--in about four months. There are income limits for applying for Chapter 7 and they vary from state to state. The best candidates for Chapter 7 are people who have modest income and do not own real estate. Others can qualify for Chapter 13 bankruptcy, which requires you to make payments to your creditors over a period of three to five years. After that period, much of your remaining debt will be discharged, or eliminated. You can file for bankruptcy on your own, but the process can be complicated. Most bankruptcy attorneys will offer a free initial consultation, and that could be valuable even if you plan to handle the filing on your own.

Debt Management Plans

Debt management plans are typically directed by nonprofit credit counseling agencies, including those affiliated with Consumer Credit Counseling Services (CCCS). The agency will evaluate your income and expenses before placing you on a budget as part of a four-year plan to repair your debt--and your credit. You'll send one check to the agency each month covering all your bills. The agency then will send individual checks to your creditors, and also ask them to lower interest rates, waive late fees and reduce balances by reversing some finance charges. The goal is for you to emerge from the plan with four years of on-time payments, less debt and an improved credit score. CCCS agencies are located nationwide and can be found in your telephone directory.

Debt Settlement

Debt settlement allows you to pay off debt by offering less than the full amount owed. Credit card companies and other creditors often will agree to settlement offers after you fall four or five months behind. According to the New York Times, debt collectors sometimes are willing to forgive up to 80 percent of what you owe, although settlements for about half the balance due are more common. The companies would rather settle with you than sell your account to debt collection companies, often for pennies on the dollar. Firms specializing in debt settlement will represent you for a fee, but the Federal Trade Commission says many of the companies are untrustworthy and that you should handle your own debt settlement.