What is Debt Elimination?
Debt elimination is a general term for any combination of strategies used to clear up consumer debt over time. It is mainly reserved for situations in which consumers can no longer make their payments. Unlike other frequently used terms in the debt relief industry that name specific types of debt relief, debt elimination is a general concept that applies to anything done to eliminate unmanageable debts and collections.
While being in debt is considered normal and frequently necessary, it becomes a big problem when you can’t make your payments. As soon as debt becomes unmanageable, it’s a good idea to regain control, and if that’s not possible, you have to take action. Once you’re in debt over your head, debt elimination should always be the goal.
Sometimes debt elimination involves steps that you take yourself. Occasionally, it involves steps you can take through the legal system. And in some cases it involves steps you can take using a debt relief company. Either way, the primary goal is always to get rid of debts as quickly as possible and this usually means getting help. Successful debt elimination often entails using a debt consultant or adviser who can create a system for eliminating your debts. Such a system, which is tailored to your particular financial circumstances, is called a Debt Management Plan.
What is Debt Management?
Debt management is a personalized system for debt elimination which employs personal budgeting, debt consolidation, debt negotiation, and/or debt settlement. Each of these techniques represents a different way to get out of debt and they are often used in conjunction with one another. The goal is to eliminate debt as quickly as possible, but since it’s also necessary to have enough cash flow to live life, the process of elimination needs to be managed. In other words, you need a plan which accomplishes the goal of getting out of debt, while also enabling you to live month to month. Debt management plans can be complex or simple. It all depends on your situation and how much debt you have.
How Can I Eliminate Debt on My Own?
If you’re late on payments and your consumer debts haven’t been sold to collection companies, you might be able to arrange for a new payment plan with your creditors. Sometimes creditors will agree to a temporary hardship program if you can convince them you really need a special program to pay back what you owe. Unfortunately, this can be hard to arrange because it’s easier for credit card companies to sell debts.
Another way to eliminate debts on your own is to create a personal budget that actually works. Again, this can be difficult, but it’s not impossible, especially when you get help.
You might also be able to create your own consolidation loan to use along with your budget. But before you take any of these actions, make an appointment with a non-profit credit or debt counseling company. They can offer you free advice and will provide a free assessment.
What Are Different Types of Debt Elimination?
Many debt elimination success stories involve several techniques for eliminating debt, but here are some of the most effective and popular strategies:
- Debt consolidation, in which multiple debts are bundled into a single, more affordable payment.
- Debt negotiation, in which your debts, or certain of your debts, are reduced to lesser amounts by a debt relief company that can negotiate with creditors on your behalf.
- Debt settlement, in which your debts are reduced by negotiation with creditors (essentially the same as debt negotiation).
- Bankruptcy, in which you qualify for debt relief under the Federal Bankruptcy Code.
- Personal Budgeting or Money Management, in which you reduce spending dramatically enough to eliminate the debts over time.
DIY Debt Elimination
If you are a do-it-yourself type of person, and feel that you can motivate yourself to stay on task, check out Dave Ramsey’s Financial Peace. Dave Ramsey is a best-selling author and radio talk-show host. His program uses a debt repayment program that builds on itself, known as a “debt snowball”. His book, “Total Money Makeover” has helped thousands of people overcome their debt problems and get back on their feet financially. His sponsored programs are also offered in more than 2,800 churches across the country and are taught by individuals who have succeeded with his program.
A debt snowball is when you pay minimum payments on all your debts except the lowest balance. You focus all your excess income on making double or triple payments on that lowest credit card balance. If you don’t have excess income, you keep cutting until you do.
Remember living above what you make is the cause of debt in the first place. Once you pay off your lowest debt balance you take all the money you were using to pay off the lowest debt to pay off the next lowest debt obligation. They call it a debt snowball because as you pay off your lower debt balances, the amount you can apply to the higher debt balances increases because all your minimum payments on the lower debt amounts can be applied to the higher balances since you already paid off the lower debt amounts.
There is some debate about whether this is the best DIY approach to paying off debt since the lowest debt balances may not be the debt balances with the lowest interest rate. Some might think it makes more sense to pay off the higher interest rate credit cards first, but there is something wired in our brain to reward us for “winning” at what we set our mind to. By paying off the lowest credit card balances first, you are less likely to get discouraged with your goal to get completely out of debt.
There are myriads of finance books out there that can help if you are looking to do it on your own. Some popular authors are Dave Ramsey, Suze Orman, David Bach, and Elizabeth Warren. Each of these authors look at debt elimination as an important part of getting into better financial health.
Professional Debt Elimination
Many people have a hard time knowing where to start and staying motivated during a debt elimination program. If you are one of these people, professional debt elimination is the way to go. My experience with Curadebt was truly life-saving. Read my story below to see how they can help you.
How We Got In Debt
As a realtor, my income has always fluctuated. I would go months with little or no pay, but the promise of a big paycheck was always just a “Sold” sign away. I worked hard to provide for my family, and we felt safe using credit during those slow times, since I would pay them off every time I received my commission checks. This was a good system for us and we were able to stay on top of things.
When the housing market took a dive, the lack of a steady income really hurt us. Those commission checks were fewer and farther between. The credit card debt was mounting and those big commission checks didn’t seem so big anymore.
Then we hit a really long dry spell – I hadn’t sold a home for more than 9 months and we had accumulated over $44,000 in debt. We couldn’t even afford to make the minimum payments required.
How We Got Out of Debt
With the new laws we knew filing for bankruptcy wasn’t an option for us. A friend suggested we contact Curadebt, a debt negotiation firm. So, we filled out the form for a free consultation and signed up right away. Curadebt negotiated with our creditors on our terms. They saved us over $33,000 and they saved us from filing bankruptcy.
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Avoid Bankruptcy With A Debt Elimination Program
Because of our experience with Curadebt we were able to avoid bankruptcy and we saved over $33,000. Life is so different now we are out of debt – no more sleepless nights. We truly feel like a burden has been lifted from our shoulders. We are back in control of our finances and we feel like we can start making progress towards financial freedom.
What Others Are Saying
“When I was almost done with the program it was a feeling of… light at the end of the tunnel.”
Matt – LA, California
4 accounts settled 11 months
“I know that Curadebt has helped me learn how to be wiser, how to spend my money.”
Mark & Erin – Philadelphia, PA
10 accounts settled 14 months
What To Do Now
Head on over to Curadebt for a free, no obligation Debt Consultation.