The process

Reducing or eliminating your debt includes your cooperation with your creditors and the help of an attorney from a debt management agency. You can find these agencies by searching online or through the recommendation of a friend. But, you have to make sure that the company that you are enlisting to help you smooth out your problems is a legitimate one. Check for its credentials by looking if the company has affiliations with government agencies such as the United States Federal Trade Commissions. Between a company that has accreditation and one that does not have license, go for the legal one to keep you and your money safe.

First, you have to determine all your debts. List them down and present it to your attorney. Be honest and tell him all about your current financial status as well as the reason why you were not able to pay your creditors on time. If you lost your job because your former employer closed the business down, then tell that to him. This will enable your attorney to provide you with credit card debt help and in turn properly consolidate your credit card bills with your creditors.

What can you expect from debt negotiation

If your attorney was able to explain everything to your creditors, there is a good chance that you will be given ample amount of time to settle your dues. There is also a good probability that your creditors will lower down or completely remove the interest rates that they charge you for. This will enable you to pay your debts without being burdened of the interest charges.

You also have to verify with the debt management agency on their professional fees. There have been reports about clients who ended up paying more than what they owe because of the fees charged by their financial counselors.

On declaring bankruptcy

Another way to legally eliminate credit card debt is by filing for bankruptcy. However, those who are living on a paycheck to paycheck basis and got unemployed are qualified for this. Otherwise you have to present proof that you are really bankrupted.

As the economy takes a turn for the worse and as people get overwhelmed by their debts and the threats of bankruptcy, they turn to companies which consolidate credit card bills. While there are good-intentioned companies, there are also entities which aim for profit in the guise of helping people. Therefore, several things have to be considered before taking the debt consolidation plunge.

What is consolidation?

Debt consolidation, also called debt relief, refers to the way companies offer loans that can be paid to creditors. Rather than making multiple monthly payments, consumers are only required to pay the relief company once.

The company then pays off the consumer’s debts. Because these companies offer interest rates which are lower than the rates of the consumer’s existing debts, people see them as saviors in these debt-ridden times.

Type of debt covered

While debt consolidation loans can provide short-term relief, they cannot be used for all types of debt. Secured debts with collateral cannot be renegotiated by the debt relief company. An example of this is the home mortgage loan or the car loan.

If one fails to pay the mortgage, the bank takes possession of the home or the car. Consolidation only works with unsecured debts without collateral like credit card debts.

Choosing between bankruptcy or debt relief

After filing for bankruptcy, a person becomes protected from his/her creditors. This means that the creditors cannot go after the person and collect unpaid debt. This reduces one’s anxiety about nonstop phone calls, foreclosure proceedings or repossession threats.

Filing bankruptcy does not prevent a person from applying and receiving car loans or home mortgages in the future. It even helps the person regain a good credit score.

On the other hand, debt relief companies may make credit worse because they do not make timely monthly payments. This induces the creditors to intensify collection actions, augment interest rates or charge additional fees for late payment.

This can lead to diving credit scores. While loan interest rates of 14-15% may be charged to people who have good credit scores, people with bad credit scores are charged with interest rates as high as 18-21%.

As mentioned, credit card consolidation addresses credit card debts and provides short-term relief but can hurt credit scores in the long run. A person considering a debt consolidation program should look at all factors before jumping into the bandwagon.

Furthermore, it does not solve the root cause of debts – overspending. In conclusion, a person can lower debts by keeping spending minimal and, if pushed to the wall, declaring bankruptcy. This last option allows people to discharge their debts and have another try at a financially stable life.

I looked into credit card debt relief, thinking to find debt help from outside sources. While there are some great programs out there, and people like Debt Busters, I realized pretty quickly that to clear debt I needed to set goals. My goals on my terms. It will sound unconventional to most people but I’m using television to help me pay of debt.

When you set a long term goal, something that is going to take a few years, you have to set small goals that, in time add up to the larger goals. This goes for losing weight, getting in shape or getting out of debt. Clear debt solutions start with clear goals. My goal: pay off a $20k student loan and a $100k mortgage. If I stick to my goals, I can do it in just under five years. Five years is a long time, so to make it palatable, I broke it into weeks. I will be completely debt free in 238 weeks. And to reward myself for each week that goes by, I am watching a Joss Whedon television episode. Joss Whedon is the genius behind Buffy the Vampire Slayer, Firefly and Dollhouse.

Finding out how to clear debt is not hard. There are tons of books and sites devoted to helping you get out of debt. The part that matters is between your ears. You have to be ready to slough through a few years of sacrifice and believe me, that is all mental. Give yourself small goals to start. Pay off your smallest debt first and see how that feels. As you take these steps towards financial freedom, your relationship with money will change. You will begin to enjoy saving money. You will look for ways to spend less. You will name every dollar before it is spent. You will indeed become a debt free junkie.

If you want to reduce debt faster, seek the advice and expertise of debt reduction companies. The first thing to do is grab your monthly bills and total them up. You need to do this to know how much you actually owe. Get a pad and write down each creditor’s name, the total amount owed, the date the payment is due, what the minimum payment is, and your interest rate –if applicable.

This will not only help you assess how much debt you really have, but helps the debt reduction companies. Do not be shocked if you are stunned by the amount of debt you truly owe. When you write it all down it creates reality. Once you have clarity on your finances, you have taken your first baby step to help reduce debt faster.

Now that you have a visual on how much money you are paying out, take a look at what you bring in. How much money do you make? Do you work a full-time job, a part-time job, and you have a business on the internet? If you make money from all of those avenues, include it. In order to reduce your debt faster you will need all funds on deck! No hiding little stashes of cash either. All of this is income and needs to be included when you speak with debt reduction companies.

Ok, in order to reduce debt faster, it is time for the eye-opener. Look at how much money you make versus how much money you are shoveling out. Did you just take a gasp? If so, that probably means that you are spending more than you make.

The good news is that a great plan from debt reduction companies can get you back on track. Chances are you can curb your spending habits without feeling deprived.