How to Get Rid of Debt Legally

People accumulate debt for different reasons, such as having unexpected car repairs and medical bills, going on excessive shopping sprees, purchasing expensive luxury items or becoming unemployed and losing their main source of income. Having a large amount of unpaid debt may lower your credit score and make it difficult for you to obtain credit in the future. However, there is an effective way to remove some of that debt from your life. Learn the proper way to get rid of debt legally.

Instructions

1

Review your budget by evaluating your income, financial obligations and savings. For instance, make a list of all of your bills and expenses, such as rent or mortgage, car note, food, utilities, health insurance premium and medication costs and subtract that amount from your current monthly net income. This will give you an idea of how much money you can afford to pay towards your unpaid debt.

2

Contact the creditors or collection agencies to settle your debt. Based on your current financial situation and the amount of your outstanding debt, the creditors or agencies may provide you with a settlement offer for less than what you owe. Be prepared to negotiate the settlement offer until the amount is affordable for your budget. If you are unable to pay the entire settlement amount up front, ask the creditor for an installment settlement, which allows you to pay it over a period of time (usually two to six months).

3

Request a confirmation letter. Once you agree upon a settlement offer, ask each creditor or collection agency to send you a confirmation letter outlining the terms of the payment agreement. The letter should include important details such as your outstanding balance and the due date for your payment(s).

4

Make your payment(s) according to the agreement. It is important that you abide by the agreement and submit your payment(s) on time. As soon as you pay off each debt, ask the creditor or collection agency to send you a paid-in-full letter confirming that you have a zero balance on your account.

5

Check your credit reports for updates. Wait at least 30 days before you obtain a copy of your credit report from the three major credit bureaus--TransUnion, Experian and Equifax. Once you receive your credit reports, read over each one to verify that your account has been updated to a "paid" status.