Debt is one of those words that brings up all kinds of negative emotions, fear, shame and guilt among them.  It's also a topic that everyone has an opinion on.  

Some will argue that some debt is good while others will argue that all debt is bad. 

What I find most interesting is the idea that there is a single best way to get out of debt.  The truth is that there is no one size fits all strategy to eliminating debt.   There are however two truths when it comes to tackling debt:

1. You must spend less than you make.
2. In order to spend less than you make you must either increase your income or lower your expenses.

The trick is figuring out the combination for your individual circumstances.  If you have suffered a Financial Hardship, your strategy will be different from someone who hasn't undergone such an event. It's important to understand the difference. 

A financial hardship is anything that has lowered your income or increased your expenses to the point where you can no longer afford to make your minimum payments.  Financial Hardships include loss of job, reduced income, a house payment that has adjusted upward, birth of a child,  medical expenses.

If you have suffered a financial hardship your choices are going to be as follows:

• Continue to try to make the minimum payments, missing a payment here and there and living off of credit cards.  This is a ticking time bomb and you hurt your credit big time usingthis strategy.
• Credit Counseling (aka - CCCS):  These organizations are typically sheep in wolves clothing.  They are usually owned by credit card companies themselves and take money from you the consumer and the credit card companies themselves.  They work by lowering your interest payments, and charging you a monthly fee to manage your debt.  You send them a monthly payment, that is slightly lower than your current minimums and decide who gets paid and who doesn't.  CCCS also puts a mark on your credit report which acts as if you've undergone a bankruptcy.  The quoted payoff time is typically 5 - 7 years but typically it's 7 - 9 years before you are out of debt.
• Debt Settlement:  Debt settlement companies will actually tackle the principal balance of your debt.  They do it by negotiating with your credit card companies and will save you 50 - 60% off the principal balance.  A good company will have you out of debt in 2 - 3 years, no longer than 48 months.  There is no hardship program that is faster or more effective than debt settlement.  Your credit takes a serious hit when you are in the program but it quickly recovers once all your debt is paid.  It's not for everyone and it only works with unsecured credit cards, medical bills, and personal loans.  Be wary as there are a lot of new companies cropping up who don't have your best interest in mind. 
• Bankruptcy:  Bankruptcy is the last alternative.  The goal of Debt Settlement and Credit Counseling are to help you avoid bankruptcy. 

In most circumstances, debt settlement is the least harmful and most effective of the hardship categories.

For those who are not in a financial hardship, your options are much wider.  The debt strategy that is right for you will depend on your goals, your age, and your exit strategy.  By your exit strategy I mean what do you want to do once you are completely out of debt?

Your options are going to be debt consolidation loans, debt roll-down strategies, interest cancellation strategies, or a combination of all three.

The solution is to seek help from a professional who is experienced in reviewing individual situations.  There is no one size fits all solution to managing debt.  What works for you might not work for your neighbor.  If you find yourself struggling to make payments, get a qualified opinion sooner, rather than later.

Kate Bourland is a Debt and Credit Specialist. Customized Debt Solutions. Got Debt? I can help!

Call Today 1-530-419-3967