How to Terminate & Eliminate Unsecured Debt

Eliminating unsecured debt, such as credit card debt, has many advantages. Having a good debt-to-credit ratio could boost your credit score and make you eligible for better rates on mortgages, automobiles and other forms of credit. Creditors like to see that you have more credit available than debt. Eliminating unsecured debt could also be used as a spring-board to becoming debt free. Then the finance charges and monthly payments you usually make to card companies can be tucked away into savings.

Instructions

1

Employ reasonable strategies for eliminating your unsecured debt. A non-profit agency credit counselor can explain the most popular options. Find a counselor in your area by seeking a referral from your bank or credit union. Options for eliminating unsecured debt range from making your monthly payments until the debt is eliminated to the extreme option of filing for bankruptcy protection. Another option is debt settlement, which allows you to pay off your unsecured debt for less than the full amount owed.

2

Consult with a bankruptcy attorney. Chapter 7 bankruptcy can eliminate unsecured debt in just a few months, but your credit score will be greatly damaged, at least initially. Still, this may be an option if you are eligible for Chapter 7 bankruptcy and your unsecured debt is out of control. Generally, only those who can pass a means test qualify for Chapter 7. Others can choose Chapter 13 bankruptcy, which requires a payment plan of three to five years.

3

Make lump-sum payments, offer settlements for less than the full amount, agree to a debt management plan, or increase the amount you pay each month to pay off your debts faster.