Did you know that the fastest way to get out of debt is to increase your income? That simply allows you to put in more for debt payments and thus lower your balance faster.

One of the reasons why you are in debt is because your income is not enough to pay for the lifestyle that you are currently leading. While you may think that you can always lower your expenses, it may not be enough. You can only lower household costs up to a certain level. Although making better spending choices is a must, even your best efforts may still fall short if you combine your bare basic necessity needs and your debt payments.

So even as you begin a debt relief program, you have to consider how you will increase your income too. You may have gotten the best debt relief company in the industry but even they can only do you so much. Combining their program with an increase of earning will expedite your debt freedom achievement.

If you will increase your income, you have to consider how you will do it. You do not want to burn yourself out too much physically and mentally. Fortunately, there are three options for you to get additional income as you continue to work your day job.

One of them is by getting a passive income business. This means you only have to invest and work on the business at the beginning - and it will keep on generating your income even after you have stopped. Sometimes, it will require you to put some human input but that may be too spaced apart that you don’t really feel like its work.

Another great option for supplemental income is using your hobby. There are many things that you can do. If you know arts and craft, you can create products and sell them online or in the weekend market. The same can be done if you love carpentry, sewing, painting and even shopping. There is a need for a personal shopper and if your taste is good, you may find it to be an interesting second career. Cooking and baking are also something that you can earn from. Offer to bring lunch for your officemates or sell to them cookies and pastries that you have baked over the weekend. You can advertise your services as a caterer for small and intimate gatherings.

Lastly, you can get a second job online. The best thing about this is you can work at home. If you know how to write, this can be a career for you since a lot of web content and article writing is needed by online businesses. You can also be a graphic designer or a web developer/designer. If you know programming and you can learn how to create applications like games, this is a fast rising online career.

The key is to explore your options and be open minded about how you can increase your income. While you are at it, make sure you put in some funds toward your savings. That will help finance any emergency situation without compromising your usual funds for basic expenses and debt payments.

A lot of us are quite scared of communicating with creditors. That is probably because we have a strong sense of responsibility about our debt. We are ashamed to talk to them especially when we know that we had been late on our payments.

Defaulting on payments does not necessarily mean that you had been reckless with your spending. Sometimes, you are forced to use your debt payment fund for more important expenses like those for your health.

Being sick is a valid reason to be late on your debt but that does not exempt you from the late penalties and other charges associated with it. However, you can work on making things less destructive. This is an unexpected circumstance that nobody wanted - in the same way that some people do not want to miss payments because they got laid off from work.

So if you find yourself intentionally defaulting on payments because of your sickness, here are some of the things that you can do.

First of all, you need to call your creditors. Despite how you view them, creditors appreciate sincerity in their clients. Just pick up the phone or send them a letter to let them know that a sickness is causing you financial difficulties. This crisis is making you miss your payments. Explain the situation and express your sincere intent on paying back what you owe. Acknowledge that the crisis does not take away your responsibility for the debt but at the same time, let them know that you simply cannot afford your current debt payment requirements.

Do not be afraid to tell them the details of your illness. Be prepared to show a document from your physician to prove your claims - especially any future medical treatments that will indicate how long you have to pay medical expenses that you are currently financing.

Creditors usually have programs in place that will place you in a special payment plan that you can afford. Or, you can opt for a third party debt relief service life debt management or debt settlement. All of these are effective in getting you a lower payment plan so you can pay off both medical expenses and your current debts.

Create a budget for your finances so you know how much you can afford to keep paying your debts. Be honest with yourself and never promise to pay more than what you can really spend. Defaulting on the new payment plan may get the ire of your creditor so try not to disappoint them. Make sure they understand that your medical expenses will come in first.

When you have ironed out your plan for your debts, you want to keep from taking in more debt. In this particular case, you don’t want to accumulate medical debts. Research on charitable organizations and government programs that can help people with your specific medical condition. You can also approach local churches to see if they can provide you with financial or other forms of support to help you maximize your limited finances.

In case the creditors do not want to give you leniency, you may want to look for a debt relief company who can assist you in negotiating your debts. Your best option is to have your balance reduced so that you can get out of debt faster.

A lot of financial problems result from poor financial decisions. Being in debt or having a limited income are only among the few problems that are troubling the average American today. One thing’s for sure, if you want to get out of this predicament, you have to do something about it.

For most Americans, debt is the primary reason for their financial hardship. Their limited income is wasting away on debt payments that they find it hard to stay motivated because they are not really enjoying the fruits of their labor.

Fortunately, there are debt relief options that you can use to help you out of your debt problems. However, it is important that you approach the whole thing smartly. You don’t just choose an option because it gives you the most saving or it gets you out of debt faster. There are various considerations that you need to analyze before you make a decision.

First of all, you need to analyze your finances. That is how you be smart with your debt. To be able to solve your debt, you need to know the problem first. This can be done by creating a budget plan. You need to list down your income and expenses so you can see if you are overspending. That is one of the causes of debt - spending more than what you can really afford.

Through your budget, you will know how much you can afford to pay off your debts. By removing the expenses, you should be able to see your disposable income. Knowing this amount is very important because you get to choose the right debt relief option.

For instance, if your income is enough to cover the minimum payments of your debt or only has a very slight deficit, then debt consolidation programs will be a great option for you. If the deficit is big and you need a reduction on your overall debt balance, debt settlement is the best option. If you can barely meet your basic necessities because your income is so small or you have no income to begin with, then you may have to resort to bankruptcy.

Another way to be smart with your debt relief option is by knowing your priorities and what you want to accomplish beyond your debts. Those in debt tend to focus too much on getting out of it and in the process, they end up choosing the wrong debt relief option. For instance, with bankruptcy, there is a possibility of having your debts discharged in a matter of months. However, it will have some grave effects on your credit score. So if your priorities include putting up a business in the next few years or buying a house, you need to take care of your credit score to accomplish that. That means your choice will have to be either debt consolidation or debt settlement. You just have to grow your income to be able to afford either of the two options.

Think about all your choices and make your selection based on your financial capabilities and your financial goals. This will ensure that you will make smart decisions about your debt relief option.

Medical debt is another type of credit that most people are burdened with. Health care is not cheap and the rising costs to treat an illness can put anyone in debt.

In truth, being in debt is not always because of bad spending habits. Some people made all the right choices in terms of their finances. However, when tragedy struck, it turned out that they lacked in one area: saving.

As any doctor will tell you, prevention is better than cure and the same can be applied even to your finances. Instead of putting yourself in debt when a significant amount is immediately required, you have this financial net to fall back on.

This is especially true for those who are suddenly faced with a medical emergency. It can be quite stressful when you know that you do not have the money to finance your treatments. But that can be solved or averted if you only learn how to save up for it. You can invest in a health coverage or insurance so you have something to use when you or a family member contracts an illness.

Medical debt is a serious problem that Americans are facing today and while saving is one way to solve or prevent it, there is another option. If you find yourself deep in medical debt and you still think you will incur more, here are a couple of options that is available for you.

One of them is debt settlement. While debt management can help with this, it usually requires you to stop incurring debt. If this is not possible because you are still undergoing treatments, debt settlement can be a viable option. You can use your medical condition to prove that you are in a financial crisis and you need help through debt reduction. You can send a letter to your creditor, discussing why you are late on your payments and indicate that you are open to discuss how you can still make payments despite your limited resources. Negotiate to pay only a percentage of your current balance and have the rest of your debt forgiven.

You can also look for government backed aids to help you make ends meet as you continue to incur medical debt. Research on the Internet for charitable organizations who can help with the type of illness that you have. They can give you medical aid in the form of free consultations and medical services. They can also provide you with financial support and even medicines.

There are also cheaper alternatives in terms of health care. This will minimize the chances of you putting yourself in debt. Research and ask for various alternatives to heal any ailments that you may have.

Also, make sure that every billing statement that you get is carefully scrutinized. There are times wherein people are billed for services and medication that they did not get. Check the quantity and question any entry that you do not understand. This will ensure that you will only be paying for what you received.

More than anything, saving is still the best way to solve your medical debt problems. Not only that knowledge will be your greatest ally so make sure you are aware of your options.

There is no foolproof way of getting out of debt. All of the debt relief options have successes and failures. The failed attempts have varying reasons that can include being in the wrong program or inability to commit to the program. This is why it is important that you know the risks involved in every debt solution so you can prepare for them and make sure that you will be part of the success statistic.

One of the most frowned upon solutions for credit problems is debt consolidation loans. It is not that the concept is flawed. Financial experts do not make it a first option because it has a lot of potential to go wrong. But if you know what they are, you should be able to avoid them easily.

So what are the risks involved in debt consolidation loans?

First is the risk to grow your debt. This is how debt consolidation through a loan works. If you have mostly credit card debt, you want to make significant payments on your debt without having to pay so much on fees and interest rates. You will achieve this by getting a loan that has a low interest rate. The loan amount that you will target should be big enough to cover all your credit card balance. When your loan is approved, you pay off your credit card debts, thus having them all revert to zero balance.In most cases, people get tempted to reuse their cards simply because the balance is low. They are deluded into thinking that their debts are not so big when all they actually did was to shift the debt around. If you are not careful with your credit card, you may end up growing what you owe.

Another potential risk is losing a valuable asset. There are two ways for you to get a low interest loan: a good credit score or a collateral. These two will make you a low risk borrower. If you do not have a good credit score, you may resort to using a valuable personal asset to lower the interest on your loan. This is probably alright if you have a steady income but if that is suddenly compromised, you may lose the collateral that you used on your loan.

Lastly, there is a risk that you will not really learn your lesson. As important as it is to get out of debt, you want to make sure that you will not land in the same situation again. That being said, you need to identify why you got into debt and how you will ensure that it will not happen again. This is not part of the debt consolidation loan program as it only concentrates in paying off what you owe. It is only upon your own personal effort that you can successfully stay out of debt. Be sure to practice the right financial management skills that includes smart spending habits, savings and budgeting. These are the keys to prolonging the debt freedom that you worked so hard to reach.

Debit cards are becoming popular nowadays because of the negative publicity that debts are giving credit cards. Anyone who intends to make wise financial choices are encouraged to give up the latter for the bad spending habits that it promotes. It allows consumers to purchase items that they cannot afford at the moment. By relying on a future income that may or may not come, they are risking a future filled with debt obligations. Instead of enjoying the fruits of their labor, they have to send it to creditors for products that may have already lost their appeal.

Apart from the ability to buy things without waiting to save up for it, another appeal of credit cards is the safety of not bringing cash. Well if this is the major appeal for you, debit cards can serve that purpose very well.

Debit cards allows you to purchase items without having to carry cash. But unlike the other type of card, you need to put money in it before you can swipe it. In essence, you stock the card with cash before it can be used for any purchase. If you run out of money in your debit card, it becomes worthless until you put more funds in it.

Another benefit of these cards involve reward points. Most stores offer debit cards to loyal patrons to encourage them to make constant purchases. These are coupled with reward points that consumers can redeem later on.

While all of these are appealing, one question remains to be answered: will debit cards help you stay debt free?

The answer to that is yes. You can say that it will keep you from acquiring debt. That is a given fact because you cannot spend more than what is currently on your account. Unlike credit cards, you are actually using money that you have at the moment. You may not be handing over physical cash, but you are spending cash that you own already - just stored in a safe place. That in itself, is one way to implement a cash only purchase without endangering actual money from being snatched from you.

Debit cards also allow the elimination of any fees and interest rate for every purchase that you make. There are fees when using a debit card but this is usually shouldered by merchants and retailers. This is also a great option for people who do not have their own bank accounts (unbanked) or those who have limited access to traditional banking services (underbanked).

While all of these are beneficial, you need to consider if debit cards actually teach us proper financial management skills. In most cases, they do. It is true that parting from actual cash is more difficult and this make you think twice about spending it. This may not be as strong as spending through debit cards but the bottom line is they help you live within your means. As mentioned, you only spend the amount that is on your account.

You just have to be careful about the debit card that you will use because there may be hidden charges that you do not know of. Read through the fine prints to understand if there are fees every time to deposit money, check your balance and so on. Some cards charge a monthly service fee. While the combination of these costs may not be as significant as a credit card, you should be aware of them nevertheless. Make sure your account is FDIC insured to protect the money you will place there.

The means test gave bankruptcy a whole new meaning. Before its implementation, bankruptcy meant not having to pay for any debt that you owe. At least, that will be the case when the court finds that you are in a real financial crisis. They will view all your assets and see which ones can be liquidated. That involves the process of selling off valuable assets and the proceeds go to your creditors. Anything that is not paid off will be discharged (or forgiven).

During a financial crisis, some people just want to get out of it - regardless if there will be severe credit score implications. They file for bankruptcy just to get it over and done with.

The government took notice of this and came up with the means test to separate the abusive bankruptcy filers from those who are in a real crisis. This test lists a series of qualifications that should be met. Now, people have two bankruptcies to consider. The first one is Chapter 7 and it is similar to what was described in the beginning of this article.

The other type is known as Chapter 13. This is type of bankruptcy involves a repayment scheme that is similar to debt settlement - minus the deliberate defaulting on payments. It is also something that both you and the creditors will submit to. The court decides everything and the both of you will have no power over the court ruling. The bankruptcy court will look over your finances and your debts and come up with a repayment plan that you have to complete. Once completed, the rest of what you owe will be forgiven and you will be debt free.

To decide which bankruptcy you are qualified for, you need to go through the means test. The initial scrutiny will be on your debts. It will be done by a court appointed official known as the trustee. There are debts can cannot be covered by bankruptcy and the trustee will identify them. Then your income will be checked. If your income is below the median salary range of the State where the bankruptcy petition was filed, then you qualify for Chapter 7. If not, then you will be scrutinized further.

You need to deduct your basic expenses from your income. The income has to be the average of what you received for the past 6 months. For the expenses, you need to know that there is a standard list of what you are allowed to deduct from your income. The expenses for your yacht may not be included in this list.

The difference will be called your disposable income. If there is none left, then you may find that you still qualify for Chapter 7. But if the amount is significant enough, then you will end up with a Chapter 13 filing.

These are your options for bankruptcy, but know that you have other alternatives to get out of debt. You need to consider that there are debt consolidation options that you can look into. These include debt management, debt consolidation loans and debt settlement. They all have specific qualifications too but they will their effects will not be as destructive on your credit score as those of bankruptcy.

The key to succeed in any debt relief effort is to come up with a plan that will serve as your guide towards debt freedom. Anyone who is gearing up to deal with their debt problems should anticipate a lot of temptations along the way. You will find a lot of instances that will tempt you to use your debt payments for something other than your debt. These should all be avoided so you can get out of debt as soon as possible.

One of the best plans that you can use is a debt management plan or a DMP. This is a required plan during a debt management program. A debt counselor will be assigned to you to help create it. They will help you implement it too. However, if you want to skip the fees associated with this debt solution, creating your own DMP may prove to help you make your DIY debt relief program possible.

So what can be found in a debt management plan?

First of all, it lists all of your debts. When you work with a professional, you can only include your credit cards, personal loans, and other unsecured debts. Since you are doing this on your own, you can probably include other secured debts in it like your car and home loans. The important thing is to list down all the debts that you want to monitor payments. That is what the DMP will help you accomplish. It will help you manage your debt. When you list your debts, highlight important details like the debt balance, minimum payments and the due date.

After you have accomplished this, determine the amount that is left of your income after your basic living expenses had been paid for. What you have to realize is when you go through this path, you need to have adequate income to support your debt payments. That means there is extra money left after all your basic necessities are paid for. If you do not have this, you may have a hard time with this debt solution. If your income after living expenses are a little short, then you can look at your expenses to see where you can save some more. Or your can grow your income to meet your debt payments. If none of it works, you could be better off with other programs that will aim debt reduction rather than a simple debt management plan.

Another thing that you can do is to negotiate with your creditors. This negotiation is usually only for unsecured debts. Negotiate with them to accept a lower monthly payment in exchange for a longer term. This is best done in writing so you can document all communication efforts with the creditor. Ask them to freeze your account if they have to. Show them the DMP that you created for the debt that you owe them. Start with your credit card debts and then your personal loans until you reach an adequate amount that your income can afford.

The main factor that will make your DMP successful is how you stick with it. If you succeed in lowering your monthly payment with certain creditors, you need to ensure that it will be followed strictly. Otherwise, they may go back to the usual amount that you are required to pay off. That will mess up your budget for the rest of your debts.

What do you do when your income is not enough to cover both your basic needs and your debt payments? Do you run away from all your problems and give up?

Although you may feel like giving up and just run away from all your debt problems, you need to face the mess that you made. Ignoring your debts will not make things better too. This is one problem that you need to act on to be able to solve it.

If your income is not enough to cover your basic expenses and all your debts, one of them will have to change. It’s either you increase your income, you lessen your expenses or your reduce your debts. For some people, the first two is their first option. But then again, what if you did both and it is still not enough?

Fortunately, there are debt reduction options for people who need it: debt settlement and bankruptcy.

The first option is debt settlement. Of the two, this is the more prominent option in terms of debt reduction. The fact is it does not have that much negative effect on the debtor’s credit score - unlike bankruptcy. You will begin by telling your creditor that you are in a financial crisis. To prove this, you will deliberately default on your payments. Instead of sending the amount to your creditors, you will place it in a separate account where you will grow it to be your settlement fund. This is what you will offer your creditors. When the 6th month or so comes in, a collector will take over and will be more aggressive in their efforts to get you to pay.

The key to sway the creditor/collector to agree to settle is by telling them that you are on the brink of bankruptcy. Creditors, especially credit card companies are among the last to be given anything when a debtor files for bankruptcy. So you can very well expect that they will be hesitant to go to bankruptcy. If they agree to your request, you will pay the settlement amount and the rest of your debts will be forgiven. Your score will suffer because of the deliberate defaulting on payments.

While there is a significant debt reduction, there are instances wherein people opt to avail of bankruptcy instead of debt settlement. This is despite the credit score implications that are the worst among all the other debt relief options. This is when they don’t even have enough to pay for the settlement fund.

There are two ways for it to go: Chapter 7 and Chapter 13. The first is the option that most people want to get because it leads to the complete discharge of their debts. If you have any valuable asset, the court will decide which should be liquidated and distributed to your creditors. Anything that cannot be covered will be forgiven and no one will come after you again for it. Chapter 13 is similar to debt settlement because there is a repayment plan that the court will order you to complete. Once this is fulfilled, the rest of the debt will be forgiven. The court will decide which bankruptcy you will file depending on the means test. For instance, if your salary is above the median range in the State where you filed bankruptcy, then your chances of filing for Chapter 13 is high.

These options will get you out of debt in 4 years or less. If this is your only option, do not worry too much about your credit score. While it will be destroyed, the important thing is to get out of debt. You can always rebuild your credit score. Just make sure that you will start making smarter financial decisions so that you will stay out of debt for good.

Debt negotiation is an effective way of getting out of debt. It involves communicating with your creditors so they can accept your proposal to pay for only a portion of your debt and have the rest of it forgiven. Not all creditors will immediately agree to this. Most of them will probably give you a hard time at first. But if you know that it is possible and you use the right techniques, you may get the approval that you need. If everything goes well, you may find yourself out of debt in less than 4 years.

However, you need to make sure that you have the right debt first. Debt negotiation or debt settlement is only ideal for certain types of debts.

The best debt to apply this option to is your credit card debts. Card companies know that when it gets to bankruptcy, they will be on the least priority. That means, if you have mortgages, any liquidation coming from your personal assets will be sent to them first. The chances of the card companies getting anything is very low. This is why they will be more amenable to agree to your settlement offer. This is also true for other unsecured debts like those from store cards and personal loans that you have.

Secured loans like mortgages and car loans will not work because you cannot negotiate to settle without putting your collateral on the line. The best that you can do is to ask for a loan modification or a home refinancing. Debt consolidation may be the better debt relief option for you at this point.

For student loans, they are neither affected by bankruptcy or debt settlement so you really have no choice but to seek for government aid to get help. There are programs that will help reduce your loan amount - specifically the monthly payment dues. This way, it will be easier for you to meet your payments and spend for other important things in your life. If you are in a real financial crisis, you can even have your debt completely cancelled. But this is something that you need to be qualified for.

It is important to remember that all debt situations are unique and you cannot expect that all of them will be solved by debt settlement. But if you think that your credit problems can be dealt with through this option, then here are some tips that you may want to use.

First of all, keep mentioning that if your creditor will not lower your payments, you have no other option but to file for bankruptcy. If you are talking to credit card card companies, you know that they will be the first to be discharged so they will receive nothing from you. Settling will be their best option.

When you are negotiating for the amount that you will settle, aim for more than 50% off on your current balance. Or if you have a settlement fund set aside, aim much lower than that so you have enough room to negotiate without falling short.

Lastly, put everything in writing. There is no one else to do this but you. In case you come into an agreement, never send any payment unless the creditor sent you a written agreement that states everything that you discussed.