How to Get Out of Big Debt

A past due or delinquent debt in any amount can be difficult to repay if you find yourself in the midst of a financial crisis. If your financial situation prevents you from repaying the full amount of a substantial debt obligation, learn the legal options you have to clear the debt. While the level to which each option affects your credit rating varies, you can be sure that your account will be cleared and creditors will stop contacting you about the debt.

Instructions

1

Settle big debts for which you can budget a settlement payment. Work with a licensed credit counselor who is skilled in debt elimination. Request the complete elimination of all penalty fees and negotiate a reduction of the debt amount. Depending on the age of the account, offer pennies on the dollar and request a settlement agreement in writing.

2

File for Chapter 7 bankruptcy. If you cannot budget yourself out of debt in five years, file a petition along with your financial documents from the previous two years at your local district bankruptcy court. Six months before filing, you must attend a credit-counseling class.

3

Complete two compulsory meetings with a court-appointed trustee. In the first meeting, you and the trustee will review your petition for bankruptcy for truthfulness. In the second meeting, you, your creditors and the trustee will meet to finalize the petition. The second meeting is scheduled one month after the first.

4

Retain a copy of the court-issued notice saying you are legally discharged from your debts. Keep the notice along with other financial documents related to the filing in a safe place.

5

Enroll in and complete a financial management instructional course in accordance with the 2005 Bankruptcy & Credit Counseling Act.