Accumulated debt from student loans, credit cards or medical bills doesn't simply go away. The type of debt determines how it is handled; for example, student loans from the government must be repaid and cannot be cleared away by filing bankruptcy. Reach out to your debtors and attempt to negotiate either a payment plan or a settlement agreement, which decreases the total amount of debt and could improve your credit score in the process.
Student Loans
Federal student loans are slightly more flexible than private student loans and typically have options that allow you to repay your debt with an income-based repayment plan, which sets the monthly payment amount based on how much you earn in a month.
Credit Cards
Contact your credit card company before your account goes to collection to avoid dragging down your credit score. Credit card companies are often willing to settle for a percentage of the total bill you owe them, or at the very least allow a temporary low payment amount for your bill until you are able to resume your minimum monthly payment amount.
Medical Bills
Doctor visits, medication and hospital stays quickly add up to exorbitant charges even if you have health insurance. While hospitals may not be able to reduce the total cost of your bill, they are able to provide a payment plan for the cost of your hospital bills.
Debt-Settlement Companies
Avoid using debt-settlement companies, since they can end up charging an unreasonable number of fees for using their services. In addition to large fees, credit card companies may flag your account if they find out you're working with a debt-settlement company to take care of finances, according to MSN Money. A flagged account is likely to be forwarded to a collection agency in an attempt to collect on the account. According to MSN Money, your best bet is to contact your creditors and attempt to settle directly, rather than rely on a risky debt-settlement company.
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