Debt Elimination

Written by Sarah Provost
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Debt elimination isn't the easiest thing in the world to do, but there are a few steps you can take to remove that cloud hanging over your head. One method, of course, is to declare bankruptcy. If you have huge debts caused by medical expenses or some similar disaster, and are absolutely unable to repay the debt, then bankruptcy is an option. However, a bankruptcy will affect your credit for ten years, making it almost impossible to get credit at a reasonable rate, or even to rent an apartment. If your debts have been built up by your own purchases, bankruptcy may not be an ethical choice.

Another option for debt elimination is to borrow against your 401K retirement plan, your life insurance, or your home equity. This may make sense if there is a big enough differential in interest, but beware of "robbing Peter to pay Paul." If you do decide to opt for this alternative, be certain that you replace the funds you borrowed from yourself before you run up debts again.

Debt consolidation means that you pay off all your credit card bills with one loan. You will usually be able to get significantly lower interest rates, but you will still be repaying the entire amount of your debt, plus interest and fees. If you exert good discipline toward repayment, debt elimination can be accomplished in much less time than by paying the credit card companies directly. There is also the convenience factor of only making one payment each month.

Debt Elimination Programs

In the last decade, there has been a tremendous growth in companies dedicated to debt elimination by negotiating for you with creditors and collection agencies. Often, credit card companies are willing to accept a reduced payment rather than have you default altogether or declare bankruptcy. Conditions do apply if you want to use this method. For one thing, you must be considered incapable of paying your debt in full. Results vary, depending upon the skill of the negotiators and the willingness of the creditors to cooperate.

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