You’ve got several options when you make the decision to eliminate debt.If you’re financially drowning, of course you can declare bankruptcy.You get the money, pay off your accounts, and then make a single monthly payment to pay off the new debt.Debt consolidation makes 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.A great way to consolidate debt, especially if you have bad credit, is to enroll in a debt management program, which we’ll discuss in a moment.
Even if you fall in a low tax bracket, you could face a huge bill to the IRS.
You can get rid of credit card debt in several different ways. You can also take out a home equity loan (or a cash-out refinance) from your mortgage lender, or you can open a new credit card and transfer the balances over.
The latter might come with a zero percent introductory interest rate, giving you several months or more to pay down your balance interest-free.
You may have heard that some creditors are willing to settle your debt for pennies on the dollar.
In reality, credit card debt forgiveness is rare and tricky, and can be very costly. Then you have to convince your creditors that you don’t have the means to repay your debt and your situation isn’t likely to change.
You’ll make a single payment to the plan manager, who will distribute the funds to your creditors.