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How to Get Out of Debt – 3 Powerful Bankruptcy Alternatives

Debt Management

Debt is an inevitable part of our living experience. Sometimes it just comes upon us in the most inconspicuous way as a result of credit cards, quick loans and easy payment plans and so on.

However, a good debt management program can help relieve some of the unwanted consequences.  The first principle to acknowledge is that debt is incurred when one lives above one’s means .Consequently, the first part of any debt management strategy is to develop a budget based on priorities and needs. The next step is to start eliminating expenses that falls at the bottom of these two headings (Priorities and needs) until balance is restored and even a surplus of cash on the side.

In entering a debt management program, you must first set your budget by listing your financial activities for a span of time. You can begin by recording your income and expenses in a month. By doing this, you will be able to identify your expenses and subtract it from your earnings. It is also recommended to provide tolerance to the value of your expenses to consider the different types of expenses you encounter each month. This technique shall serve as guide in handling your finances wisely.

There is no real downside to debt management.  The only thing that may be a downside to some is that it may require great discipline and possible lifestyle change.

Debt Consolidation

Debt consolidation could be helpful if maxed out your credit cards, or if you have numerous loans with high interest. This method will enable you to consolidate your high interest debt into one manageable payment. A debt consolidation firm can also help you lower your interest rates, handle your paper work, cancel fees and close accounts. In five years or less, you can avoid debt.

Debt consolidation companies consolidate to lessen the impact of credit. However, most lenders are particular in not giving further credit unless they find the borrower can handle his debts and pay the debts along with the interest regularly. It is advisable to look into the accounts to see that your debt consolidation company is in fact paying your debt in a timely manner.

Debt Settlement

To be able to sweep those debt by creditors, another option is to undergo debt settlement.  In this way you’ll have some financial relief on your budget each month. By this, you can also start planning all your credits. So, instead of being late on all your credit payments and having a very high debt load, you can now arrange and manage it far better than before. No hassles whatsoever.

There are some negative aspects to debt settlement. The main aspect to negotiate is the effect on your credit score which is immediate. You need to build your score and the trust back up allowing companies to further business with you. Thus, for a period of time you may have restrictions on purchases, offers, or even refunds by your state or province.

Another aspect you need to deal with is the tax implications. The government doesn’t give leeway to those dealing with debt settlement. They see this as being given free money, cash, or a gift and may charge additional tax fees.

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