One of the most frustrating financial situations that a consumer can be stuck in is to be heavily in debt. The freedom that comes with being able to spend your paycheck the way you want to disappears as your minimum payments each month seem to take more and more of your income. It becomes impossible to qualify for a loan when you really need it, simply because you don't have the resources to pay down the loans you've received in the past.



Debt is difficult for all consumers. There are solutions, however, that can help borrowers reduce and even pay off debts to reduce financial stresses and restore financial freedom.

Some of these solutions include:

- Budgeting: This is the "do-it-yourself" method when it comes to getting out of debt. It's the process of disciplining yourself to spend less than what you earn, and use the difference to reduce debt obligations. This method requires sacrifice, but there are plentiful resources available online and at public libraries to help consumers start making smarter financial decisions.

- Credit Counseling: A credit counselor will take your debt situation and help you make important decisions on how to improve it. Often, they will represent you and approach your creditors to try to reduce debt balances and interest rates. This is a $7 billion a year industry now, growing all the time as more Americans struggle to overcome debt problems. There are good and bad companies when it comes to credit counseling, so knowing who you're working with is vital. There can be significant costs and risks associated with credit counseling services, and it can look negative on a consumer credit report.

- Debt Consolidation: Debt consolidation is the process of combining your debts under one umbrella, making payments to one creditor instead of several. Home equity loans are often used to consolidate debts. The benefits include a lower interest rate, a simplified debt situation, and possible positive tax consequences. The drawbacks include difficulty in qualifying for a consolidation loan and the fact that missing payments could result in the loss of the asset securing the debt, including your home.

- Debt negotiation: Debt negotiation is the process of approaching your creditors to reduce the balance you owe. Some creditors are willing to accept a partial payment and write off the rest of the loan, recognizing that a partial payment is better than no payment at all. The downside of debt negotiation is that the amount you save may be considered income for tax purposes and the fees can be high. It's important to use a reputable company if you're hiring someone to negotiate debts in your behalf.

- Bankruptcy: The last resort to overcoming massive debt problems, bankruptcy is a court order releasing the borrower from an obligation to repay a loan. This is essentially wiping the borrower's slate clean, although it will be very hard for the bankrupt individual to qualify for any kind of financing for several years because of the damage bankruptcy does to a credit report.