We all want to get rid of debt. Debt is very costly and can prevent us from reaching our financial goals (or at least prevent us from reaching them when we’d like to). Some people consider credit card debt as a bad debt and mortgage or student loan debt good. The truth is that having any debt means you are financially beholden to a creditor and you can’t put your money in your own pocket until your obligation is met.
If you are financially drowning, of course you can declare bankruptcy. The main problem is that bankruptcy is a serious derogatory mark on your credit. It won’t prevent you from getting credit in the future also, but for a time some credit products will be unavailable to you and others will come at very steep prices. Not all the debts can be discharged in a bankruptcy.
The next option is to ignore your debt. At that point, the delinquency stops affecting your credit score. Your credit suffers tremendously in the meantime, and since you are still legally obligated to pay the debt, a debt collector can pursue you until the statute of limitations runs out in the state where you live.
In reality your credit card debt forgiveness is rare and tricky, and can be very costly. You have to first be in serious arrears. Then you have to convince your creditors that you do not have the means to repay your debt and your situation isn’t likely to change. If you manage to work out a debt settlement agreement, but guaranteed to report your forgiven debt to the IRS. The forgiven debt is to be considered as taxable income.
The debt settlement process involves hard-core, long term debt collection attempts by your creditors, and serious credit score damage that will last for many years.
If you willing to pay off debt fast, the best way is a two-pronged approach:
The meaning of Debt consolidation is taking out one new loan large enough to repay some or all of your outstanding debt.
Debt consolidation make the sense for people who want to make one payment each month instead of several, and for those who can lower the amount of interest they pay by taking the new loan.
You can always figure out how long it will take to pay off your debt using a debt payoff calculator like this one from CNN Money. It’s a great tool to see just how many years it takes to pay off debt, especially high interest credit card debt on which you make a small minimum monthly payment.Tags: Debt Consolidation