When you're drowning in debt, anything that can help you get rid of debt and get your life back can seem like a lifesaver. The truth is, most quick debt cures come at steep price, whether it's fees charged by debt negotiators or the damage done to your credit score.
No Quick Cure
You probably didn't get head over heels in debt overnight, there's no way to get rid of debt overnight with no repercussions. Unfortunately, it's often much easier to rack up debt than it is to it is to pay it off. Therefore, any legitimate road out of debt will not be an easy one. Any quick cure for debt will almost certainly destroy your credit score, making credit difficult to come by in the future.
Debt Settlement/Negotiation
Companies that claim to be able to settle your debt for pennies on the dollar, or to erase your debts make tantalizing claims, but the truth is much less attractive.
"Despite the claims, settlement is not an easy way to slash debt, doesn't always work and could wreak havoc on your credit score," writes Bankrate's Leslie McFadden.
Debt settlement or negotiation firms often claim that they can settle your debt for half or even less of what you owe, but they often charge exorbitant fees and ask you to stop making payments on your debt. Both stopping payment on your debt and settling your debts for less than you owe is destructive to your credit.
Bankruptcy
Filing bankruptcy is a quick cure for debt, but only if you qualify for Chapter 7 bankruptcy, which eliminates most debt. However, if you do not meet the guidelines for Chapter 7 bankruptcy, you must file Chapter 13, which means repaying some or all of your debts over a period of several years. Although Chapter 7 bankruptcy can erase much or all of your unsecured debt, it's the most destructive thing you can do to your credit, often knocking hundreds of points off your credit score, and staying on your credit report for up to 10 years.
Debt Management Plans
While a debt management plan will not eliminate your debt overnight, it can eventually cure you of overwhelming debt over a period of years. A reputable credit counselor can assist you in working with your creditors to create a repayment plan that will lower your payments and/or fees and interest, allowing you to repay your debt over a period of years.
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