To get out of debt you have to face your problem head-on and create a plan―and then execute that plan. While it won’t be easy, it will be worth it. Once you are living without the burden of debt you will be grateful that you took the necessary steps to get yourself out of debt!
The Best Way to Get Out of Debt
The best way to get out of debt depends on your specific situation. What options are available to you and feasible for you depend on many factors.
The first thing to do is to get clear on how much debt you owe. It isn’t uncommon for people to only know the ballpark figure of how much debt they owe. Make a list of all of your debts and add up exactly how much you owe.
The next thing to do is to explore your options for getting out of debt. Evaluate your options and then choose which one is best for you.
- Create a budget tailored to pay off your debt.
- This is an excellent solution to your debt problem if you have adequate income and can stick to a budget aimed at quickly and reasonably paying off your debt.
- If you can reasonably afford to pay back your debt within two to three years, then paying it off is likely your best option.
- If paying off your debt means struggling to pay for living necessities like rent or food, paying high interest on debts for many years, and not having an emergency savings fund or saving for retirement―that is not reasonably paying off your debt and we encourage you to explore your other options.
- Settle your debts.
- Settling your debts for less than the full amount owed most often requires a large sum of cash up front. Typically a Debt Settlement Agreement requires that the agreed upon amount be paid in full within a few days or weeks.
- Debt settlement comes with potential tax consequences because “forgiven debt” is considered income by the IRS. If you go this route, make sure you can afford the additional tax liabilities.
- Debt consolidation.
- A debt consolidation company will collect a monthly fee from you and attempt to make debt settlement deals with your creditors.
- Many of these companies fail to fulfill their promises or fail to offer any services at all. Be cautious to avoid being scammed by companies offering debt consolidation services.
- Take out a loan to pay off debts.
- The loan is used to pay off creditors. Then one payment is due on the loan each month.
- This is a good option if you can get a loan with a more favorable interest rate than your current debts, and you can afford the monthly loan payment, and you will pay the loan back within two to three years.
- File for bankruptcy.
- Filing for bankruptcy is a legal right that helps people erase debts and/or repay their debts over time.
- If you cannot afford to pay off your debts within the next few years, it is time to consider if bankruptcy is the best way to get out of debt. If you are going to be paying back your debt for many years, paying far more than your borrowed because of interest, unable to properly save for retirement, then bankruptcy might be your best option.
Once you’ve explored your options for getting out of debt, then choose the one that is best for you. Make sure that the option you choose addresses all of your debts. For some people, bankruptcy is the best way to get out of debt because the other options are simply not feasible or would take so many years to execute that they are economically damaging and would keep a person deep in debt for many years to come.
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Find out more about Bankruptcy in our guide: All About Bankruptcy
Our law firm is committed to helping people get out of debt and gain the financial freedom they deserve. We invite you to learn more about who we are here. If you live in Savannah, GA or the surrounding areas and have questions about your debt relief options, let’s meet for a free consultation. Call us at (912) 351-9000 or contact us here.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.