What To Do If You’re Drowning In Debt

There are a lot of tips on this debt blog that will help you with your debt problem. But what if your debt problem is so big that tasks like curbing your spending or creating a budget simply won’t help? That’s when you need to take more drastic steps. Read on for some advice on what to do if you’re drowning in debt.

Credit Counseling

Some government sponsored credit counseling agencies will work with you free of charge. They will look at your financial situation (debts, income and expenses) and they will create a plan to get you out of debt. Here’s the thing though, the only way it will work is if you follow through with this plan. Not only that, but after you debt is paid off you’ll need to continue these healthy financial habits you’ve formed.

Debt Consolidation

Debt consolidation is when you combine your many debts into one debt. Say you have the following debts:

– car loan at 8% with $5,000 owed
– credit card at 21% with $10,000 owed
– personal loan at 14% with $5,000 owed

You can get a consolidated loan for $20,000 at 15% due in 5 years. Doing this has several benefits. First, you will only have to make one payment instead of three. Second, your monthly payment could be lower since you’re extending the repayment of your debt in getting a 5 year loan. Finally, you have a fixed monthly payment with an end date in view. It can be a rewarding feeling to know the exact date that you will be debt free.


The final option, and least friendly, is bankruptcy. A bankruptcy should be used only as a last resort. After all, it’s not nice (or fair) to borrow money and then never pay it back. Companies who are taken advantage of in this way will end up needing to raise their fees to their paying customers to make up for the loss.

People who file for bankruptcy are those who have much more debts than they can ever pay back. It allows them to clear the slate and start over.

When you file for bankruptcy, keep in mind you will lose some of your possessions, it will cost you just under a thousand dollars, some debts may still not go away, your credit score will instantly plummet and this stain will stay on your credit report anywhere from seven to ten years.