Do It Yourself Debt Settlement

When people become overwhelmed by debt and see no way to resolve the financial problems on their own, they often turn to debt consolidation companies to help them find their way back to financial security. While this approach works very well for many people, it is not the only possible way to deal with resolving old debt. The truth is that it is possible to develop a workable plan of action, and become debt-free once again without using any type of debt service. Here are some suggestions in how to go about this process of do it yourself debt settlement.

First, it is important to know exactly how bad your situation actually is. In order to accomplish this, compile a list of your bills. This includes credit cards, mortgages, car loans, and any other obligation that is currently outstanding. Identify the amount due monthly on each of these obligations. This will tell you how much of your net income is going toward settling debt each month.

Next, look closely at your household budget, and identify how much you are allowing for items like food, clothing, shelter, utilities, meals out, and other common line items. When these totals are combined with the amount of your total debt obligation each month, this will give you the minimum amount of income you need each month to live a decent lifestyle and still be working toward paying off your debt.

Hopefully, your net income is sufficient to cover all your bills. If not, then it is time to begin revising the budget somewhat. This means identifying areas of the budget where you spend money on non-essentials. For example, if you are spending $100.00 a month on meals out, this needs to stop. You can cook at home and save a considerable amount of money over the year. Eliminating waste will free up income that you can divert to retiring your debts in less time.

As you revamp your budget, plug that surplus income into your overall debt reduction plan. If you have debts that are already past due, contact your lenders and make arrangements to bring the debts current, then set a minimum amount to pay each month that will keep you from falling behind again. This may mean closing some of your credit cards to further purchases while you pay off the balances, but that is okay. Doing so often either prevents your interest rate from going up, or possibly even having the credit card provider freeze the amount due and not apply any more interest, if you keep up the new payments according to the revised scheduled.

Keep in mind this will require you to contact each creditor individually, explain your situation, and ask for their cooperation. Many creditors will balk at first, and attempt to get you to agree to making large lump payments over a period of a few months. If that will work well in your overall debt settlement plan, that’s fine. If not, make sure the creditor knows that the alternative is declaring bankruptcy, where there is no guarantee of receiving any type of compensation on the outstanding balance. When creditors begin to realize your situation is that dire, many will work with you, if for no other reason to recover a larger amount of the balance without having to spend a great deal in legal fees.

If you are not currently behind on any of your obligations, you can engage in a little debt settlement without actually consulting any of your creditors. Simply identify an amount of your monthly income that is not needed for essentials, then devote that amount to paying off your debts. Apply that entire amount to one debt, such as a credit card with a low balance. Continue to pay the minimum payments on your other cards while focusing on settling that one debt. Once it is out of the way, move on to the next debt on the list and use the same strategy. This approach preserves your credit rating while still lowering your indebtedness each month, eventually resulting in retiring every debt you currently have.

In order to make any type of so it yourself settlement scheme work, you will need to refrain from creating new debt. This means no using the credit cards for anything. Your spending is done specifically on a cash basis. While this is likely to be a shock to your way of life, it will become much easier to manage after a couple of months. The pride you feel by seeing first one, then another debt be settled in full will more than make up for the small sacrifices you make. This will be especially true when you reach the point where you no longer worry about creditor calls at home and work, and do not live in fear of what the mail will bring.


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