• Credit Counseling

This has become all the rage today, with thousands of companies vying for your eyeballs and trying to offer you the chance to negotiate away your debts. This does work, but usually not the way the slimier ones will claim. The reality is that you can get discounts on your debts. I was offered to settle my debt for as little as 65 cents on the dollar by one of my credit cards. More typical was to lob off the accrued late fees in exchange for a lump sum payment. If you have the money to pay off your debts, but not to make all those interest payments, this may be a way to go. Find a reputable company to work with and they can help you to do the negotiations. Be aware that this will still hurt your credit. Your accounts will be listed as closed and settled. In some cases, they may also list that it was settled for less than the full amount owed. However, not settling your debt at all is far worse.

• Bankruptcy Chapter 13

No, it’s not a book about someone going bankrupt. Rather, the law that allows people to declare bankruptcy has several sections, called chapters. Chapter 7 means settling for less than you owe. It’s similar to the credit counseling option, except that this is administered by a court so the creditors have to follow what the judge says. The first option (counseling) is all voluntary on both sides. These days, this is the most common kind of Bankruptcy. The good news is that bankruptcy isn’t what it once was. It is no longer a terrible stigma to go bankrupt and in fact, it may be a good thing in the long run, because it says to people, I had problems, but I dealt with them and now I’m moving on with my life.

• Bankruptcy Chapter 7

Just like Chapter 13, this is another part of the bankruptcy code. This is the one I followed. Basically, the idea here is to get a chance at a clean slate. You will not owe any debts once this is done, however you will be required to “liquidate” anything that is non-essential. If you own a home, it may be put up for sale. If you own a car, ditto for that. There are exemptions based on where you live (For example, some states will let you keep your home if that is where you live. Sometimes you can keep the car if you can prove that it’s necessary for work). This debt relief solution is only available however when you have exhausted other options. You will have to prove to the judge that you tried debt counseling and that only a clean slate will allow you to get out from under your debts.

In order to make the best decisions on what debt relief solution you should choose, it’s best to speak to a qualified bankruptcy attorney who can advise you on your options.