Debt Payment Programs

Without making a plan to pay off your debt, you're likely to remain trapped in debt for the rest of your life. Buckling down can be difficult, but there is help available if you feel that you need it. Look for the debt payment program that fits best with your personal financial situation.

Self-Payment Plans

In a self-payment plan, you simply look at your debts and budget your money to pay them off quickly. Personal finance author and speaker Dave Ramsey has popularized the "Snowball Method," in which you pay as much as possible toward the debt with the highest interest rate first, while paying the minimum monthly payment on other debts. Once you've paid off the first one, you roll all of your extra money into the debt with the next highest interest rate. "Laddering" your debt is a similar method, except that you pay off the smallest loans first. The hallmark of paying back debt on your own is tightening your belt---creating a budget to reduce your expenses and applying that extra money toward your debt.

Debt Settlement

In debt settlement, you work with your creditors to pay off your debt. Talk to a debt management company that will in turn contact your creditors to make arrangements. The debt management company may be able to persuade your creditors to reduce the principal balance, but creditors are more likely to reduce the interest payments. Using this option, you no longer have to deal directly with your creditors. You'll start making payments to the debt management company, which will pay the creditors on your behalf.

Debt Consolidation

If you have equity in your home, you can use that to take out a debt consolidation loan. In doing this, you obtain the total amount of money that you owe on your loans and pay off each of them. Then, you only have one monthly payment toward the consolidation loan. This often decreases the total amount that you'll pay because it reduces the interest rate.

Chapter 13 Bankruptcy

Under Chapter 13 bankruptcy, the federal courts will rearrange your debt to make it more manageable for you. You will get to keep your home for at least three years, during which time you can try to get back on your feet. The downside to this method is that it gets reported on your credit report and will decrease your credit score, making it very difficult to get credit in the future.