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I have a lot of debt, anywhere from $20-$25k. Where do I start?

I have a lot of debt, anywhere from 20-25k, I am currently unemployed and have a monthly income of 600. Where do i start? and how can this possibly w...

I have a lot of debt, anywhere from 20-25k, I am currently unemployed and have a monthly income of 600. Where do i start? and how can this possibly work for someone who is unemployed. I thought about Bankruptcy but what is your opinion?

You have options Krystal, but for you I would really start with what can you afford to contribute to a debt payoff program monthly. I would guess that the lowest payment would be in a debt settlement program and that would be around $450-$500 per month... which would be all of your after tax income, so you probably want to speak to a bankruptcy attorney. I will cover your options in detail, however, and let you decide what is best for yourself. makes it easy for you to apply for traditional forms of debt relief, by following this link: Debt Relief Savings Quote


The four primary concerns for most consumers looking to pay off debts are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the credit rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors. Since there are a variety of debt consolidation options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, bankruptcy, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.

Here are your 5 debt resolution options:

1) Pay the creditors back the usual way:

If at all possible, pay much more than the minimum payments. The best way to lower cost is to pay off the entire balance in full immediately. If you are only paying minimum payments, or close to minimum payments, you can potentially pay up to 3 to 10 times the original debt amount. For example: If you pay 30% interest on a charge card, you are paying in interest the entire original loan amount almost every three years, and not getting the debts paid down! Since you are mostly just paying finance feeÂ’s you could potentially pay for up to 10-20 years. For someone with $10,000 in debt it could cost them $30,000 or even $75,000 or more depending on interest rates and monthly payment amounts.


2) Bankruptcy:

Chapter 13: also known as reorganization, since you pay an attorney and then a trustee to set up a repayment plan and then the trustee administers your repayment of a portion of your debts. Chapter 13 typically allows debtors to keep property, like a mortgaged house or a car. A Chapter 13 bankruptcy repayment plan may take around five years to pay down your debts. This is typically a trustee managed payment plan to re-pay your debts, and the trustee will set your monthly payment based on your income and assets.

Chapter 7: known as liquidation. Chapter 7 involves liquidation of all assets that are not exempt in your state, and then the proceeds go to pay down your debts. Exempt property may include work-related tools and basic household furnishings. Some of your property may be sold by a court-appointed official or turned over to your creditors. You can file for Chapter 7 only once every six years. This is the most aggressive debt resolution strategy for people who cannot afford any real monthly payments and are in severe hardship.

Both types of bankruptcy may resolve unsecured debts and stop foreclosures, repossessions, garnishments, and freeze debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary from state to state. If bankruptcy is an option you are looking to explore, you should seek counsel from a local bankruptcy attorney. You will also have to go through court mandated bankruptcy counseling sessions before discharge.

Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes and some student loan obligations. And unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it. Both forms of Bankruptcy will show on your report for 7 to 10 years and are a public record document.

3) Debt Consolidation Loan:

A true debt consolidation loan program is basically a refinancing of your mortgage or other loan. To qualify, you will need good credit and available equity to put as collateral on the new, larger loan. This program shifts unsecured debts to a new, larger secured loan. This is a good way to get your bills in order, have one monthly payment and to get lower interest. The downside is you that you have just made your unsecured debt secured. You need to make sure you can keep up with the payments or you could potentially lose whatever property is now tied into the loan. The biggest risk here is the risk of moving unsecured debts to secured debts and increasing the risk of foreclosure or repossession if you cannot make payments. It is also challenging to qualify unless you have significant free cash flow (a low debt-to-income ratio), available equity in your home, and good credit

4) Consumer Credit Counseling (Also known as CCCS)

CCCS will help you reduce your interest a little bit and lower your monthly payment. You will still pay the principal but will not pay as much towards finance fees. With each payment you will actually be reducing the balance instead of just covering the interest and fees each month. You will pay the CCCS one monthly amount which will then be distributed to each one of your creditors, on a monthly basis. These programs normally last around five years. The downside is that CCCÂ’s are reported to the Credit Bureau as 3rd party help. Lenders look at 3rd party help as the same risk factor as a chapter 13 bankruptcy. A debt management plan, administered by a CCCS firm will not hurt your FICO score but most lenders will not lend to you as they perceive it similar to a bankruptcy.

5) Debt Settlement

Debt settlement will typically reduce your total debt by as much as half and will frequently have the lowest monthly program payment of all of your options. These programs usually last 24 -40 months but can be as short as you can manage, based on your monthly payment (a higher monthly payment will be a shorter program). Debt settlement firms negotiate directly with your creditors to reduce your debt total and use many different strategies to accomplish this. The initial downside is that you usually have some “past dues” that will show on your credit report, so your credit score will be impacted. In many cases, however, getting your debts settled to zero in a short amount of time is the healthiest financial strategy for cash flows and credit. By resolving debt you could help your credit profile which is made up heavily of your debt to income ratio. This strategy is typically the fastest and lowest cost method of resolving debts with a low payment, while avoiding bankruptcy.

Net-net: while there are many forms of online debt consolidation, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits for you.

Lastly, here are some fast tips for your own quick Debt Consolidation Evaluator:

1. If you have perfect credit and have equity in your home - consider a Mortgage Refinance.

2. If you can afford a healthy monthly payment (about 3 percent of your total debt each month) and you want to protect yourself from collection and from going delinquent - consider Credit Counseling.

3. If you want the lowest monthly payment and want to get debt free for a low cost and short amount of time, AND you are willing to deal with adverse credit impacts and collections - then evaluate Debt Settlement.

4. If you cannot afford anything in a monthly payment (less than 1.5 percent of your total debt each month) - consider Bankruptcy to see if Chapter 7 might be right for you. makes it easy for you to apply for traditional forms of debt relief, by following this link: /debthelp/debt/

I wish you the best of luck in resolving your financial difficulties, and hope that the information I have provided helps you Find. Learn. Save.



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