Do it Yourself Credit Card Secured & Unsecured Debt Elimination & Redemption

If you find yourself swimming in debts that you cannot afford to repay, you may be able to reduce or even eliminate your liabilities without the help of a third-party company either by negotiating with your lenders or filing for personal bankruptcy. However, if your personal negotiations are unsuccessful and you would rather avoid the consequences of filing for bankruptcy, you may have to seek the help of a third party to reduce your debt.

Unsecured Debt

Your unsecured debt includes balances on loans and lines of credit that have no collateral to secure the balance. For example, most credit cards are unsecured debts, as are medical bills and payday loan advances. If you have a good credit score and a positive payment history, your lenders may offer you a discount on your overall balance if you pay the debt in full. Alternatively, if you are having difficulty paying your debts, you can try to negotiate a lower interest rate or partial debt forgiveness by writing to your lender with an explanation of your financial situation and your willingness to settle the debt without the use of bankruptcy. While your lenders are not likely to eliminate the debt completely without the help of bankruptcy, you may be successful in lowering your debt by up to 60 percent.

Secured Debts

In order to eliminate your liability on a secured debt, you must allow the lender to repossess the property you offered as collateral against your loan. For example, if you stop making payments on your auto loan, your lender has the right to repossess your vehicle at any time of the day or night, and in most states, without notifying you first. Similarly, failing to pay your mortgage could result in foreclosure. You may be able to work with your lenders to make modifications to your original loan agreements that include lowered interest rates and an extended repayment period. You could also try to refinance the debt at more favorable rates or obtain a home equity loan to pay off your secured debts at a low, tax-deductible interest rate. The only other option is to sell the item you financed, and use the money to pay off your secured debt balance.

Bankruptcy

The United States Bankruptcy Courts offer consumers two types of personal bankruptcy. Chapter 7 is the most drastic form of bankruptcy, requiring that you liquidate most of your assets before the court will discharge your remaining debts. Chapter 13 requires a three-to-five-year repayment plan that fits your budget, after which time the court will discharge your remaining debts. Though bankruptcy is a serious decision that will affect your credit for many years, it may be a viable solution to eliminating both your secured and unsecured debts.

Help

If you are unsuccessful in eliminating your debts on your own or do not qualify for bankruptcy, your last option may be getting help from a third party. There are many nonprofit companies that will work with credit card companies and other lenders on your behalf to reduce your interest rates and your overall debt balances. If you use one of these companies, the Federal Trade Commission warns that you should thoroughly investigate it via consumer reviews and complaints with your state attorney general's office, as well as the Better Business Bureau. Though there are many legitimate debt counseling services, there are also several companies that make false promises that could end up doing more harm than good to both your credit report and your debt balances.