Pay Down Debt by Reducing Your Spending
- Consider refinancing your mortgage. If you aren’t facing an early redemption penalty,the best mortgage deal can save you hundreds of dollars each month.
- If the children have moved out, consider selling your home and moving to a smaller property. As well as raising money that can be used for the purpose of reducing debt, your other bills will be lower.
- Use a price comparison site to see if you can secure cheaper gas, electricity and insurance. Trawl the market for the most competitive deal from your personal computer.
- Switch from branded to generic groceries and use grocery coupons to reduce your food bill.
- Cut back on outgoings, particularly, alcohol, smoking and social spending.
Paying Down Debt by Making Extra Income
- Sell surplus household goods on eBay, at auction or at a car boot sale to raise extra cash to pay down debt. You may even uncover an item of value that is stored in the loft. If you uncover any collectibles, get them professionally valued so you know where you stand.
- If no overtime is available, consider doing some freelance work. Could you teach someone to play a musical instrument or tutor maths or English? Do you have DIY skills that could be put to use? Others may wish to consider child minding, freelance writing, dog walking or pet sitting.
Relief from Debt with the Best Debt Free Solution
If you are struggling with serious debt problems and your debts are unsecured, there are three ways that you can use to get out of debt more quickly. These include, filing for bankruptcy, a debt management plan and a debt settlement program.
A debt solution will help you to pay down debt, but it will involve defaulting on your credit agreements so your credit score will fall. You should also appreciate that the IRS treats debt cancellation as a source of income. Debt that is forgiven may be taxable.
Reducing Debt with a Debt Management Plan
Although a debt management plan doesn’t involve any forgiveness of debt, it makes it a lot easier to manage. Rather than making lots of small payments to different creditors, subsequent to agreement, you’ll make a single payment that will be distributed to creditors on a pro rata basis.
Although creditors aren’t under any obligation to do so, they may also be prepared to freeze further interest and charges. Most people prefer this debt free plan for paying down debt gradually and affordably. As there is no debt elimination, there aren’t any direct tax consequences.
Pay Down Debt with a Debt Settlement Program
Unlike a debt management plan, the main objective is to reduce the total amount owed. Given that some intermediaries are able to provide up to a 50% relief from debt, it is considered the leading alternative to bankruptcy. You are then able to pay off debt over a 12, 24 or 36 month period.
There is a 15% management fee for administering a debt settlement program. However, a recent ruling from the Federal Trade Commission (FTC) has made the front-loading of charges (taking them up-front and adding them to the balance) illegal. Charges must be collected from each monthly payment.
Filing Chapter 7 Bankruptcy Provides Relief from Debt
Although the U.S. bankruptcy laws were reformed in 2005, filing bankruptcy remains one of the most effective ways of eliminating or reducing debt. Provided that your income is below the state median and you don’t have many non-exempt assets, you could be discharged from bankruptcy in just four months.
If you are unable to comply with the chapter 7 rules, you may still be able to file for bankruptcy under Chapter 13. You will be able to pay down debt over a 3 or 5-year period with full court protection. Reducing debt that is ineligible could be achieved under a separate arrangement.