Gino Rodriguez, Writer
Yes, you can get rid of debt without paying in rare cases, but it is very risky and will severely damage your credit score. You can get rid of debt without paying by waiting for your state’s statute of limitations to end and hoping you don’t get sued by creditors in the meantime. Just keep in mind that once the statute of limitations ends, your creditors can still try to collect money in other ways.
Alternatively, consider using a debt management program, opting for debt settlement or filing for bankruptcy. You will still have to repay at least some of your outstanding debt, but you could get some of it forgiven. You can find more details below.
Options for Getting Out of Debt Without Paying in Full
Debt management programs will negotiate with your creditors to create a new payment plan for you, and they will often negotiate for lower interest rates as well. Although you’re still repaying the debt, you’ll typically end up paying less than you would have if the interest rates and payments stayed the same.
Debt settlement is a way for you to get out of debt by paying less than what you owe. The process involves negotiating a lump sum payment in exchange for the rest of your debt being forgiven, which may not be possible until you default. Defaulting will severely damage your credit.
Although debt settlement can be done by yourself, it is usually done by a third-party company on your behalf. They will charge a fee for their services.
Chapter 7 bankruptcy is what most people think of when they hear the term bankruptcy. It involves selling your non-exempt property and then having most of your debts discharged. Chapter 13 bankruptcy allows you to keep your property in exchange for at least partial repayment of your debt.
Bankruptcy can help get rid of debt, but you should be prepared for the consequences that follow. Bankruptcy will stay on your credit report for 7-10 years and will severely damage your credit score.
Preferred Ways to Get Rid of Debt
The best way to get rid of debt and save money in the process is to get a debt consolidation loan or a balance transfer credit card. These options let you combine high interest balances into one easy-to-manage monthly payment and can improve your credit score if you make the payments on time.
It’s also a good idea to monitor your finances and budget accordingly. Analyzing what you spend and cutting back on certain expenses can leave you with extra money to help get out of debt. You can also sign up for WalletHub and follow personalized WalletScore recommendations that are based on factors such as your credit, spending, emergency preparedness and retirement planning.
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