Get Out of Debt: Legal Methods of Eliminating Debt

If you need to get out of debt, there are several legal methods for doing so. Some debtors find relief from the anxiety and pressure excessive debt can cause through bankruptcy, debt settlement or debt consolidation. If you are considering any of these options, consulting with an experienced attorney can help you weigh the pros and cons of each and make an educated decision about your next steps.

Bankruptcy

Bankruptcy allows some debtors to eliminate or reduce drastically some of their debts. The amount of debt that can be discharged legally through bankruptcy will depend on the income, assets, debts and location of the debtor. Bankruptcy has some negative consequences, including the negative impact it will have on a debtor's credit. It can also make it difficult to obtain future credit, housing and it can even affect your eligibility for certain jobs.

Debt Settlement

Debt settlement is used by debtors who have fallen behind on their debt payments. By negotiating new terms with their creditors, debtors can get some of their debts legally settled. Some creditors will report the debts as settled, which can mean that the impact on your credit is not as severe as with bankruptcy. Of course, any late payments that occurred up until the settlement may have already had a negative impact. It is best to discuss this option with an attorney skilled at negotiating debt settlement.

Debt Consolidation

Debt consolidation does not reduce actual debt, but rolls several debts into one. The advantage of this for some debtors is the possible lowered interest rate and having only one payment instead of several. This can be a good choice if you can afford the monthly payment on the consolidation loan. It is a good idea to shop around for the lowest possible interest rate and best terms before committing to a particular consolidation loan. One caveat you should beware of is that using your cleared credit cards after consolidation can be tempting, but can also lead to a more serious debt situation.

Getting Legal Advice

Because debt management and solutions for debt often involve legal ramifications, it is wise to discuss any potential solutions with an attorney who can provide you with information about your situation and how the law works. An attorney can help you review your finances and look at what options would work best given your circumstances.