There are many reasons why you might be in debt, from over buying on a house to medical troubles. Regardless of the reason you are in debt, the question now is what you plan to do to get out of debt. There are many options, including bankruptcy. However, there are several reasons why bankruptcy should be your last resort. Rather you should consider hiring a debt relief company to help you get out of debt. These companies can get you out if debt in a short period of time, and can possibly save your credit score.

Cost

The first thing you will want to consider when hiring debt relief companies is how much they cost. All of these companies charge fees for their services, so you can expect to spend some more money in addition to your already established debt. However, each company’s fees are different, so you will want to shop around to find a company you can afford. The good news about these fees is most companies build their fees into your monthly payment plan, so you will not have to pay an additional monthly bill.

Company Reputation

The second thing to consider when hiring a debt relief company is the company’s reputation. Unfortunately, not every debt relief company has an outstanding track record. In fact, some of these companies might even prove to be scams. Therefore, you will want to do a fair amount of research before hiring any one company. You will not only want to make sure the company you hire is not a scam, but that it is a company you will enjoy working with. Be sure the company will not just treat you like a number, but rather a person that has been impacted by debt in more ways than one.

Services

Finally, you will want to look into what services the company you want to hire offers. Not all debt relief companies offer the same services, and not all debt needs the same service. So, you will want to look into what service you will want to help relieve your debt and if the company you want to hire offers that service. Some services may include debt reduction, debt consolidation or a debt settlement. Depending on the type of debt you have one of these services may work for you. So, the final thing you will want to consider when hiring debt relief companies is the services they offer.

Monique Rowe is a guest writer for Franklin Debt Relief.

Photo Credit: Alan Cleaver

Many students start off their new life as a college graduate deep in student debt. Graduation day becomes a bittersweet event, marking the date when many parents expect their kids to stop depending on them financially. Suddenly, new graduates are launched into the world without parental support, or college subsidized housing. Getting that first apartment and paying back substantial student debt is taxing for most new graduates. Based on these events, it is no surprise that many students are forced to seek debt relief, navigating many confusing options.

Debt Consolidation Loans

After surfing the web seeking help, many students believe initially that debt consolidation is the answer. It sounds logical when explained. Having one payment instead of four or five sounds like a good idea. So students complete a loan application, anticipating a lower payment and some debt relief.

The truth of the matter is that these loans are hard to qualify for, especially if you don’t earn enough income according to the lender’s standards. Time on the job is another criteria that creates a problem for students looking to escape debt problems. If the debt is too high to begin with, the chance that a student will qualify for this type of loan is low.

Home Equity Loans or Second Mortgages

At a time when many young adults are looking for their first apartment after life in a dorm, it is no surprise that few students have a home to borrow against to consolidate student debt. In theory a home equity loan sounds like a wonderful idea. But let’s face facts, for almost all young adults struggling with student debt and credit card bills, their first house is off in the future several years or more.

Bankruptcy

Many students may seek debt relief by filing bankruptcy. Bankruptcy can provide immediate relief to debtors suffering from constant creditor phone calls and climbing late fees. While not everyone qualifies for bankruptcy relief, most debtors do.

There are two types of bankruptcy, Chapter 7 and Chapter 11. Chapter 7 effectively wipes the slate clean for a debtor, giving them a fresh start, free from all debt (Fanny’s note: except for student loans, which can’t be cleared by bankruptcy).

If a student wants to continue paying a debt, they can typically do so. For instance if a student wants to keep a car after bankruptcy, they can continue to make that payment on the car, outside of the bankruptcy agreement. Chapter 11 allows for a person to pay their debt back. This option works best for debtors with assets. Most students have not acquired assets yet and choose to completely eliminate their date with the Chapter 7 option.

Bankruptcy remains on your credit report for 7 to 10 years, depending on which way you file Chapter 7 remains on your credit report for 10 years. As unsettling as that sounds, many students find they can obtain financing shortly after the bankruptcy is filed. Creditors often feel confident extending creditor to people just out of bankruptcy, realizing that person is no longer eligible to file bankruptcy.

Debt Settlement Company

Debt settlement companies negotiate with credit card companies and other lenders to effectively reduce a borrower’s debt. The good news is that the borrower does not typically have to qualify financially to hire one of these companies, unlike most other options. Getting an agreement in writing is important to ensure the details are fully understood. If a debt settlement company can negotiate one simple payment which is much less than the total monthly debt, then this option can offer a practical solution.

(Fanny’s note: keep in mind that you have to pay a fee to the debt settlement company. You usually make the monthly debt payment to the company and they will pay your debtors. If they make your payment late, it can affect your credit report.)

About the Author: Alan Winkler is a professional debt analyst and regular writer for Debt Consolidation Advice, a credit card debt relief blog. He also covers the various debt solutions available, like debt consolidation, including other money saving tips.

Photo Credit: j.o.h.n. walker

Getting rid of of credit card debt can take months, if not years, depending on the amount. If you are going to pay it off the honest way, without borrowing anymore money, how do you eliminate credit card debt fast?

First, start with these 5 ways to pay off debt faster. Set up a budget and cut spending. Then look for windfalls to help pay off credit card debt faster.

What is a windfall? According to Dictionary.com, a windfall is “an unexpected gain or piece of good fortune.” Why not use that unexpected gain to get ahead of debt?

Here are 5 ways (windfalls) to eliminate credit card debt fast:

Tax Refund. The average tax refund is $2,000 – $3,000. With that amount, you could pay off a huge chunk of a credit card bill fast, saving lots of money on future interest. Yes, some may see a tax refund as an interest free loan to the government. However, if you’re the type who would end up spending that extra income in your paycheck on other things, then it may be better to leave your withholdings the way they are.

Sell Something. The key to selling something and making it worth your while, is to sell something of value and in demand. Electronics and musical instruments can generate a good amount of cash while items like books will fetch only a few dollars. Check eBay and craigslist.org to see how much your item is going for.

Extra Paycheck. If you receive your paycheck every 2 weeks, rather than twice a month, then you get 2 “extra” paychecks a year. In 2011, the extra paychecks come in July and December. Put those extra paychecks to good use.

Gifts. Cash gifts and gift cards are great windfalls. How do you use gift cards to pay off debt? Apply the amount that you received in a gift card as cash received, meaning you take that same amount out of your checking and use it towards debt. For example, if it’s a $50 gift card, then take $50 from your checking account and pay off credit card debt. Make your gift card mean something… eliminating credit card debt!

Earn Extra Income. If you have a skill that allows you to do side projects on the weekends, then use that extra income towards paying off debt. Photography, web design work, business consulting, and music performance all can turn into great extra income. Skills like photography and music can be used at weddings and special events. Be creative. Are you good at leveraging social media? That’s a new skill that is becoming in demand now for marketing for small businesses.

Photo Credit: SqueakyMarmot

Featured in the Carnival of Personal Finance – Financial Literacy Edition hosted by Money Management International.

1. Know what you owe. A lot of people who are drowning in debt, got into this situation because they simply ignored their debt. By being unaware of the exact amount of debt you owe, you think you have more money than you really do. Then you end up continuing to spend more than you make, getting yourself deeper and deeper into debt.

2. Take responsibility for your finances. Your finances are your responsibility, not your significant other’s or your parents’ (or your adult children’s) or a financial advisor’s. For couples, it’s common for one person to handle the finances while the other plays dumb. Just because one person seems to have a better knack for finances, doesn’t mean the other person is off the hook. The person handling the finances could be just as clueless as you and could be digging you both deeper into debt. You won’t know if they are really paying the bills or taking out cash advances for a shopping spree. You won’t know unless you take control of your own finances.

3. Differentiate between a “need” vs. a “want“. Do you really need a fancy car, designer clothes, or the latest tech gadget? To get to this point, you’ll have to do some soul searching. If you are secure with who you are, then you won’t need “things” to make yourself feel better. Consumer debt is usually tied to underlying insecurities.

4. Create a realistic budget that includes a debt repayment plan. Track your expenses for necessities for a few months on a personal budget worksheet. Make sure you spend less than you make. If your budget still exceeds your income, either find creative ways to save money or earn more money. Be sure to include debt repayment in your budget.

5. Pay more than the minimum amount due. If you are only paying the minimum amount due, you are only paying the interest for your debt and none of the principal or amount you owe. It’s like running in a hamster wheel and getting nowhere. Pay off your debt as fast as you can, and you’ll start to see the light at the end of the tunnel.

Living Richly on a Budget was included in Money Hacks Carnival #102 hosted this week on Passive Income Now. The Money Hacks Carnival is a traveling carnival hosted on a different personal finance site each Wednesday. The carnival is a collection of the week’s best articles on personal finance, making money, and frugal living.

Check out Money Hacks Carnival #102 now.

Having debt isn’t the end of the world. But in order to get out of debt, you have to be proactive. Be lazy and you’ll stay in debt. You always have a choice. Stay in debt or get out of debt. Here is a satirical look at how not to pay off debt.

Open new credit cards. Getting a free T-shirt, umbrella, or a one time discount is a great perk for filling out a form! Aren’t they generous? Who cares if the free gift has the company logo on it? You enjoy being a walking advertisement for their product. Who cares if every credit card account that you open goes onto your credit report. Who cares if having a brand new credit card lowers your FICO score?

Don’t read the fine print. You don’t like to read long credit card or loan agreements. You only want to sign on the dotted line. You trust the loan officer or customer service person when they tell you that you are getting a good deal, even though they are being paid to say that. You only care that your minimum payment or interest is lower even if it’s only temporary.

Let your bills pile up. Don’t look at your bills. If you don’t know what you owe, they don’t exist, right?

Be clueless about the exact amount you owe and the interest rate of each debt. You make an educated guess and think you owe $5,000. But in reality, it’s really $8,000. You were off by $3,000. Oops! You could come up with a better strategy to pay off debt if you knew the principal amount and interest rate of each debt. But you don’t want to know because you don’t really want to admit that you are in debt. You like lying to yourself.

Keep using credit cards that carry a balance. Can’t pay off your credit cards every month? Keep using them because you’ll be slapped with finance charges every time you make a new purchase. Credit card companies will love you since they make so much money off of you.

Take out a loan. Want to get deeper into debt? Take out a high interest loan online. Why not trust Gary Coleman or Montel Williams to sell you the best loan in a radio or TV commercial? After all, you can trust them, can’t you? They have your best interest at heart since they are being paid a lot money to tell you that this is the best loan and it will solve all of your problems. The interest rates are through the roof right right now since a lot of people are borrowing money. You’ll pay off credit cards with this loan but incur a higher interest rate than all of your credit cards combined! You like being ripped off.

Don’t set a budget or cut expenses. Budgets are boring and restrictive. You’re a free spirit. You want to buy things as you please, even if you don’t need them. Who wants to know that they could get a better deal on their cell phone, cable/internet, or car insurance? You like wasting money.

Don’t have a debt repayment plan. You’re too lazy to create a debt repayment plan. You enjoy being in debt. Everything will work out eventually on its own, won’t it?

Pay only the minimum balance. You don’t want to give the credit cards any more of your money. That’s why you only pay the minimum balance. You’ll pay for your credit cards for a long time after you’ve made the purchases. But it’s okay because you’re only paying $50 a month.

Redeem credit card offers. Credit card companies love you! They keep sending you special offers to open more credit cards, since you have been such a great customer. Credit card companies tell you that you are a valued customer even though you haven’t paid anything off. They want you to have more money to spend. How thoughtful of them!

Don’t learn about personal finance. You don’t care to learn anything about how to manage your money or debt. It’s too hard to understand. But you’ve already broken this rule by reading this blog!

Rely on others to give you advice about your money. You don’t know much about how to invest your money. That’s why you hire a financial advisor to help you invest your money. Even though celebrities have lost a lot of money by trusting someone to invest their money, it’s ok. You would rather trust someone else to handle your money than trust yourself.

Give up. You figure that you’ll never pay off your debt. You are too depressed and overwhelmed. You think you are the only one who has ever been in debt. If you read personal finance blogs, you’ll know that almost every personal finance blogger has been in debt and have dug themselves out of it. Dave Ramsey is a great example. He had it all – a $250,000/yr salary, a nice sportscar, wife, and a house. When the real estate market changed, he owed $1.2 million. During that tough time, he lost everything except for his house. He had to sell his nice sportscar that he thought he deserved. His marriage was strained.

Know that you are not alone and you will get out of debt one day. Change your attitude and you will change your situation.

Included in Money Hacks Carnival #102.

Recently, my husband and I paid off a huge debt ,even though we are living on only one income. I’m still in shock that we paid this off so soon and without borrowing money. We did it and that means you can do it too!

When I got married 2 years ago, a friend asked me if we could live on one income, if we had to. This scenario would ring true if we started a family and one of us stayed home to raise the kids. Back then, I didn’t think it was possible.  We both had full time jobs but maybe we weren’t managing our money well. Or maybe all of our money went to our wedding, which was paid in full.

I lost my job last September. For a few months, we were forced to live on one income. Surprisingly, I was excited by this challenge. See how we downsized our budget and saved over $100 a month. It took 3 months for me to receive unemployment. Just as soon as unemployment checks started coming in, it ended, since I didn’t qualify for the extension.

All of my unemployment checks came all at once, in batches. It was a windfall of money which I am thankful for.

We could either save the money so we wouldn’t have to live on such a tight budget or pay off one of our debts. I knew that if we had extra money, we would end up spending it on something else. So we chose the latter, to pay off one of our biggest debts. This debt had such a high interest that if we only paid the monthly minimum payment of $250, we would be paying for it until 2014!

Also, I sold some of equipment from my former wedding video business. I sold a prized possession, my very first video camera. It was sold the next day on Facebook, of all places. I had a difficult time letting this camera go since I had built up a strong emotional attachment to it. But I kept reminding myself of the wonderful feeling I would have, once this debt was paid off.

By taking advantage of unemployment money and the sale of video equipment, we were able to pay off this massive debt, which we are extremely happy to get rid of. It feels like an enormous weight has been lifted off of our shoulders!

What can you do to pay off your debts faster? Do you have high-priced items that could sell well? Can you lower your budget more?

In order to be financially successful, you must be free of credit card debt. Paying only the minimum amount due on credit cards will get you nowhere. Start paying off your debt today with this 7 step plan to pay off credit card debt.

1. Know how much you make per month. First and foremost, you need to know how much money is coming in each month, whether it’s from your job, your spouse’s job, unemployment insurance, etc. Track the exact amount after taxes.

2. Set up a monthly budget. Spending more than you make is easy without a budget. You need to know exactly where your money is going. Track expenses for a month. Then set up your budget accordingly with a personal budget worksheet. Make sure your monthly budget does not exceed your monthly income. Don’t forget to set aside money to pay off debt.

3. Cut unnecessary spending. Cooking at home can instantly cut costs. Eating out is expensive and can add up quickly. On average, a couple can easily spend $20 – $30 on eating out at a restaurant. By cooking meals at home, you can bring down the cost to about $2 – $3 per person. What other ways can you reduce spending?

4. Track your debt. If you don’t know the exact amount of your debt, the interest rates on your credit cards and loans, the minimum payment amount, or payment due dates, then you cannot begin to make a change. Put all of your credit card and loan info onto an Excel spreadsheet. If you are low tech, use a piece of paper. Keep track of every loan and credit card, the current balance, the interest rate, minimum payment, and the monthly due dates. Refer to this sheet every week to keep track of payment due dates.

5. Stop using your credit cards. If you can’t pay the full amount on your credit cards every month, stop using your credit cards! If you carry a running balance on your credit card, any additional purchases will be assessed a finance charge right away. In fact, you will be charged a finance charge the same day you make a purchase, every time! You will not receive a 20 day grace period for any purchases (like you do when you pay in full by the due date every month). You don’t need to incur anymore debt than you already owe. Try to use cash for purchases. Also, don’t use the cash advance checks that come with your statement. Interest on cash advances can be 20% and up. Don’t dig yourself into deeper debt. Dig yourself out!

6. Pay off debt in collections first. If you have bills from a collections agency, then pay this debt off first. Debt in collections will lower your credit/FICO score. A low FICO score lowers your chances of being able to rent an apartment, get a cell phone, and qualify for a mortgage loan with a good interest rate. As a result, having a low credit score affects everything in your life. The good news is that you can improve your score by paying off any debt in collections.

7. Pay off the credit card or loan with highest interest and balance. Gather all of your credit card info – current balance, minimum payment, and interest rate, per card. If you’re bad at math, don’t worry, here is a wonderful free tool that will calculate how long it will take to pay off your debt. You can enter multiple credit cards and loans. Enter your balance, interest rate, and minimum payment. For the interest rate, for example, if it is 22.9% enter “22.9″. It will automatically give you a debt payment plan without you having to use any brain power. Click here for CNN Money’s debt calculator.

This is only a visual example. Click on the link above to use the debt calculator.

Enter the amount you can afford to pay towards your debt each month or your debt free deadline, in years and months, and it will figure out how much you need to pay every month to reach your goal. The debt calculator will apply more money to the credit card or loan with the highest interest and recommend that you pay the minimum payment on the remaining cards.

Seeing the whole picture of how long it will take to pay off all of your debt is liberating in a way. It takes away the fear of the unknown. Soon you will be debt free and that’s a wonderful feeling. Plan some sort of celebration when you pay off your debt!