In the current recession, a get out of debt plan is a quest that is affecting more and more people. It is very easy to get over your head in debt after you go through a rough spot financially. You may have lost your job, had a dehabilitating illness, or lost a part of your other income. For example, overtime payments. You let the credit cards mount up thinking that things will quickly be back to normal and you’d be able to pay everything off.

But often, it does not turn out to be that easy. Perhaps you are not able to find another job, or your company cuts back on your hours for good. Even if the situation is resolved and your income goes up again, the debt is usually not so easy to pay off as you expected.

The best get out of debt plan is to just keep making your monthly payments on time. Do not worry that it is going to take you what seems like forever. Just budget for it, do it and consider it a necessary expense like the mortgage or the rent. That money is not available for spending.

However, in the case where this doesn’t seem to be working, there are several things you can do.

Debt Consolidation

This is a way of paying out a lot of small loans or credit card debts with one large loan, usually a home equity loan. It can work out cheaper per month, especially if your debts are mainly on high interest store accounts or credit cards. It can also be very good for people who have problems managing money and keeping track of all their debts.

To be successful with debt consolidation, you need to include absolutely everything, and do not run up any more credit card balances after. In fact, it would be best to cut up those credit cards and store cards until the consolidation loan is paid off.

The danger with debt consolidation is that you may take out the big loan, pay the others off, but then start accumulating more debts while you still have the big loan to pay. This can leave you in a very bad situation. If you can’t pay the home equity loan, you could lose your home. Do not let this happen to you.

Renegotiate Your Loans

Most loans (including credit card debts) can be renegotiated to give you longer to pay. This will mean smaller monthly payments, or possibly a ‘payment holiday’ if you simply cannot make your payment this month.

Negotiating with your bank or credit card company is not as scary as it sounds. Work out a proposal of payments that you could make before you call, then explain your situation truthfully and tell them what you suggest.

Bankruptcy

This is a last resort process where, briefly, you have a court declare that you cannot pay your debts and will not be able to do so in the foreseeable future. You give up all you have and your creditors have to accept whatever they are awarded. Bankruptcy can be voluntary (where you initiate it) or forced (where you have court judgments against you that you simply cannot pay).

You will lose all of your assets in bankruptcy proceedings: your home if you own it, perhaps your car, any savings that you have. You will find it very hard to get credit for many years after. In terms of how to get out of debt, it is not the best way, but something that some people have to resort to.

This is just a thumbnail look at a few get out of debt plans. There are more that we will examine in the future.