How to Discharge Debt Legally

In the United States today, more people than ever before are suffering from overwhelming consumer debt. It can be difficult to decide how to deal with mounting debt. The upside of our current financial crisis is that the U.S. Government is making it easier than ever for consumers to deal with their debt. The modern debtor has several options available to him or her in order to safely and legally discharge debts that cannot be repaid.

Instructions

1

Contact your creditors. This is most effective if you contact them shortly after your account becomes delinquent. If you have recently become unable to pay off your debts, place a phone call or write a formal letter to your creditors explaining the situation, giving them an estimate of how long it will persist, and asking if you can revise your repayment terms so that you can continue to pay off the debt. Many creditors are willing to renegotiate payment schedules or repayment terms if it means their clients are less likely to default on an account.

2

Just ask. This technique is most effective for debts which have been reported for collection. If you're being hounded by a collection agency, it means your original creditor has given up and sold your debt. Collection agencies know that many of the debts they purchase are essentially worthless and will never be paid off. It can't hurt to be straightforward with debt collectors and ask them to discharge all or part of your debt. Most collectors won't agree to discharge all of it, but may settle for dimes on the dollar. If you do make an agreement with a collection agency, be sure to get it in writing or some other hard copy such as a phone recording. Note that it's illegal for you to record a phone call without the other party's knowledge. If they do give you an agreement in writing, however, they are legally required to honor it. If not, you can take legal action if they continue collection attempts.

3

Enroll in a debt management program. This option presumes that you plan on repaying your debts eventually, but do not have the means at the moment to keep up with your monthly payments. A debt management program will contact all your current creditors for you and work out a gradual repayment plan with them. You pay the DMP with a single check each month and they distribute the money according to the schedule they arranged for you with your creditors. This approach grants the debtor a reprieve from collection attempts by creditors included in the DMP, but requires the debts be repaid eventually.

4

Declare bankruptcy. This is the most extreme option for a debtor, but may be necessary. Bankruptcy presumes that you do not have the means to repay your debts anytime in the near future. If you do not have enough income to both meet your basic needs and pay off your debt, this may be the right option for you. Keep in mind that bankruptcy can create a huge black mark on your credit report and make it difficult for you to obtain credit for up to 10 years after your bankruptcy proceedings conclude. You should pursue other options and seek out credit counseling before filing for bankruptcy.