There is one more option that tries to split the difference between lower interest charges and lower payments. It’s called an extended repayment plan. This can be used to extend the term on a standard or graduated plan from 10 years to 25. It can lower your payments without the hassle of income certification. However, the payments will not be as low as what you can achieve with hardship programs.

If you’re looking for the fastest, cheapest exit possible without the expense of bankruptcy, settlement may be the best choice. Keep in mind that bankruptcy isn’t free. The filing fee for Chapter 7 is $335, then you’ll also have fees for your attorney. This is why it’s important to have the right filing expectations before you take your case to the courts.
Debt Snowball (Lowest Balance First): Even though the snowball effect applies to all of these strategies, the debt snowball strategy usually refers to the method of paying the lowest balance first. The benefit of this method is the psychological effect of seeing the number of debts disappear quickly. According to Dave Ramsey, it is important to build momentum and see success early on. After all, if it was easy to pay off debt, you probably wouldn't need this calculator.

Hi Tamara! It’s great that you’re really starting to get a handle on this. I’d strongly suggest paying your debt using the avalanche/ladder method described in this post to minimize the amount of interest you’re paying. If you’d like help building a plan, you should schedule a free budgeting call with one of our credit counselors. Good luck getting rid of this debt!
Debt settlement may be a solution if your accounts are past due or you owe more money than you could repay over a few years. When you settle your debts, you ask the creditor to accept a one-time, lump-sum payment to satisfy the debt. Creditors who agree to a settlement offer also agree to cancel the rest of the debt, but they typically only accept these offers on accounts that are in default or at risk of defaulting.
Debt settlement companies charge either a percentage of the debt that is forgiven or a percentage of the monthly payment each month. That could mean you're paying thousands of dollars to the settlement company that could have gone to pay down your debt faster. For example, if you owe $40,000 you may have to pay the settlement company from $5,200 to $8,000 in the first 12 to 15 months. Or if the debt is settled for a total of payment of $25,000 the debt settlement company will charge up to 35 percent of the settled amount or more than $8,000. The settlement company gets paid first before any monies go to the creditors.
Alongside the unprecedented spike in personal debt loads, there has been another rather significant (even if criminally[clarification needed] under-reported) change: the new legislation in 2005 that dramatically worsened the chances for average Americans to claim Chapter 7 bankruptcy protection. As things stand, should anyone filing for bankruptcy fail to meet the Internal Revenue Service regulated ‘means test’, they would instead be shelved into the Chapter 13 debt restructuring plan. Essentially, Chapter 13 bankruptcies simply tell borrowers that they must pay back some or all of their debts to all unsecured lenders. Repayments under Chapter 13 can range from 1% to 100% of the amounts owed to unsecured creditors, based on the ability of the debtor to pay. Repayment periods are three years (for those who earn below the median income) or five years (for those above), under court mandated budgets that follow IRS guidelines, and the penalties for failure are more severe.
That definitely depends on your situation! For the most part, if you have an account that is growing and gaining interest, it is highly recommended not to touch that money, even for debt. It just depends on the amount of debt and income you have! It definitely depends on your personal situation, but the majority of the time, you shouldn’t draw from a retirement account.
If you are struggling to make your monthly credit card payment, or can’t catch up with your past-due payments, we may have solutions for you. The sooner you contact us, the sooner we can determine what help may be available. We will review the nature of your hardship and your financial information to determine what payment solutions you may qualify for.
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