Helping yourself solve debt problems

If you have the financial discipline to create your own debt reduction plan, then this can be a great idea. You avoid service and program fees that come with professional debt services. However, you have to change the way you do things, and you have to show restraint and self-discipline as you work to overcome debt.

Here are some things that you can attempt on your own to help with solving debt problems:

• Learn about debt and finances. Educate yourself about the principles of getting out of debt and how to manage your personal finances.
• Approach your creditors. You can negotiate a lower interest rate or even a settlement or an alternative payment plan.
• Fix mistakes on your credit report. You can also challenge information that might be on your file too long.
• Create an aggressive debt reduction plan. Figure out how much extra money you have each month (you may have to cut out some entertainment items or other unnecessary expenses) and apply it toward one debt at a time until all of your debts are paid off.

It is important to understand yourself, though, since without the proper mindset and discipline it can be difficult to pay off your debts on your own.

Credit and debt counseling

This is a move for those who can usually take care of solving their debt problems mostly on their own, but who could use a little push. Credit counselors help you decide on a debt repayment plan, and may even be able to help you negotiate easier terms (like a lower interest rate) with your creditors. If you look carefully, you can usually find credit and debt counseling services that offer their help for free. Most organizations, though, do charge a fee.

Debt management programs

In addition to credit counseling, there are debt management programs that are operated by third parties. These are designed to help you pay off your debt in a way that is manageable for you. Debt management programs usually come in two main types:

1. Debt negotiation: The third party negotiates a settlement for your debt, which you then pay.
2. Debt consolidation: All of your debts are gathered into one place, either by a company or through a loan, and you pay them off using a lower monthly payment.

Debt management programs make paying off your debt a little easier, since they often reduce your payments to once a month.

Bankruptcy

Bankruptcy should be the option of last resort. Personal bankruptcy provides a way for you to limit what you have to pay back. A judge determines how much you are capable of paying back, and then determines a payment plan. It is important to note that thanks to new laws put on the books a few years ago, it is harder to declare bankruptcy, and you have to pay more of your debts back.

You can decide whether filing for bankruptcy is a wise a course of action by asking yourself the following questions:

• Have I tried everything else? You want to make sure that bankruptcy truly is the last resort option for you.
• Do my liabilities far exceed my assets? If you add up your assets (including your home's value) and find that your liabilities are much more than your assets, it might be a good idea to declare bankruptcy.

If the answer to these two questions is yes, then bankruptcy may be the option for you.

Credit repair services

This is often the last piece of the puzzle when it comes to solving debt problems. Debt often leaves a wake of financial destruction that looks terrible in your credit file. In some cases, a third-party, fee-based credit repair service can be helpful. Credit repair services can give you good tips on how to clean up your credit, as well as help you through the steps of removing errors and writing summary explanations.

Be aware, though, that improving your credit score and cleaning up your report can take some time. Do not fall for marketing gimmicks that promise to clean up your credit overnight, or within a couple of weeks. It can take between 30 and 60 days for any change to be made, and it make take as much as a year or more in order for your credit score to show significant improvement, especially if you have had a bankruptcy.

It is possible for you to go about solving your debt problems. However, you have to take that first step, and you have to choose a program you can stick with and that is doable for you.