How to Solve Debt Financial Solutions

Credible advice and a sound plan can help you eliminate debt. There are a variety of ways to solve debt problems, such as simply making payments each month until the bills are paid or ending the debts early through bankruptcy. A nonprofit credit counselor approved by the U.S. Department of Housing and Urban Development (HUD) can review your debt situation and help determine the right option for you. Several factors should be considered as you seek a solution, according to the Federal Trade Commission, including how much debt you have and your willingness to commit to a plan and stick with it.

Instructions

1

Find a government-approved credit counselor in your area by visiting HUD's website (see Resource). Choose an agency listing financial management as one of its specialties. Contact the agency to make an appointment to discuss personal debt.

2

Gather billing statements for all your debts, along with current pay stubs. Also, make a list of all your monthly expenses, including groceries, transportation expenses, child care and more. Take the list to the meeting with the counselor.

3

Review your income and expenses with the counselor. With the counselor's help, develop a budget covering all of your necessary expenses, such as food, shelter, utilities, clothing and transportation. Do not include vacations, cable television, monthly golf lessons and similar optional expenses. Take the credit counselor's advice when she suggests changes to your budget so you can have more money to resolve debt. Complete your budget for necessities, and then review how much money remains each month to pay debts such as car payments, credit card bills and student loans.

4

Ask the credit counselor for solutions to your debt problems if there isn't enough money left in your budget to pay your bills. Ask the counselor to tell you about every valid option for your situation, including so-called hardship plans, debt management plans, debt settlement and bankruptcy. Hardship plans, which are sometimes granted by creditors, allow reduced payments for a period of time while you recover from a financial setback, such as a job loss or illness.

Debt management plans are offered by credit counseling agencies, which will develop and manage a personalized plan for solving your debt problems. That includes taking over the payment of most of your bills after you make a lump sum deposit each month along with a monthly fee to the agency. Debt settlement allows you to resolve debts for less than the full balance owed, and bankruptcy lets you eliminate certain debt in just a few months or through a payment plan of three to five years.

5

Choose the right strategy based on your situation. Solutions for debt can be self-managed in some instances. For example, you can contact creditors about hardship plans or direct your own debt management plan by contacting individual creditors and asking for lower interest rates, lower monthly payments and even a waiver of some fees. Unsecured debts, such as credit cards, are usually addressed by debt management plans. Secured debts, such as mortgages and car payments, can be addressed through refinancing or by selling the property. Also, consider taking a second job and using the extra income to pay down debt.