Millions of Americans need debt help, but don\’t know where to turn. Much depends on the types and amount of debt owed, as well as the overall debt-to-income ratio. Solutions can range from household budgeting to personal bankruptcy.

Deciding which debt help solution is best suited for your needs requires research. The Internet is a good source for learning about available options, but it is best to consult with a financial planner or bankruptcy lawyer.

Many people find it advantageous to engage in credit counseling. Not only can counselors help devise a get-out-of-debt plan they can also provide money management skills that will last a lifetime.

People sometimes shy away from credit counseling for fear it is too costly. Nearly every metropolitan city has non-profit counseling agencies that assess fees based on earned income.

If you are considering personal bankruptcy it is best to obtain counseling from agencies approved by the U.S. Trustee. New bankruptcy laws require debtors to enter into credit counseling before their petition is approved. By obtaining counseling through an approved agency, debtors will have met the requirement should they need to move forward with bankruptcy.

Personal bankruptcy should be a last resort because it negatively impacts credit for years to come. Not only does bankruptcy affect credit scores, it can also hinder employment and housing opportunities.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult to obtain debt help. The majority of petitioners are required to reorganize debts under Chapter 13 and develop a repayment plan. Chapter 13 payments can extend up to 5 years and place strict limitations on debtors.

If debtors do not comply with payment plans the court can dismiss the petition and creditors can commence with collection actions. If debtors fail out of bankruptcy it causes twice as much harm to credit scores that will take years to recover from.

Budgeting is the most affordable debt help option, but requires the highest level of self-control. The goal of budgeting is to spend less than earned income. The key to success is developing a budget that is realistic.

People who earn less than they spend must find ways to reduce expenses or increase income. Some of the biggest budget-busters are small, impulse buys. People are often unaware of how much they spend on bottled water, morning lattes, fast food lunches, and weekend movie rentals.

Those $2 and $5 expenses add up quickly. If you have trouble making ends meet it is time to track expenses and find out where your money is going. An easy way to track expenses is to carry a small notebook or piece of paper and write down every penny spent throughout the day.

Creating a budget is not hard to do. All that is required is to make a list of fixed expenses and income. If you earn $2000 a month and half of that goes toward rent or mortgage that only leaves $250 per week for utilities, transportation, clothing, food, insurance, and savings.

Most people can\’t change their housing costs, but can reduce utilities and other costs. It may require creative thinking, but reducing expenses can be accomplished. Utility companies offer budget plans. Many phone and Internet providers offer reduced-priced bundles. Numerous websites offer grocery coupons.

If budgeting isn\’t sufficient, debt settlement might be an option. Debt settlers negotiate with creditors to lower interest rates, write-off late fees or penalties, or reduce principal balances. Caution should be used when working with debt settlement companies as many have been under investigation for consumer fraud.

Debt consolidation is another option, but generally reserved for homeowners with accrued home equity. Debt consolidation involves using home equity as collateral to secure a second loan. Real estate loans are assessed a much lower rate of interest than unsecured loans and credit cards so refinancing debts into a home equity loan can be a smart financial move.

Careful consideration must be given because you\’re using your home as collateral. If you default on the home equity loan your house can be at risk for foreclosure. With the current credit crunch, obtaining home equity loans can be difficult. Borrowers who go this route must be prepared to pay closing costs typically associated with real estate loans.

Author Bio: Simon Volkov is a California investor who has written numerous personal finance articles. He offers a comprehensive debt help article library focused on budgeting, debt elimination, and personal investing. Discover ways to become debt-free at www.SimonVolkov.com.

Category: Finances
Keywords: debt help, budgeting, debt consolidation, debt settlement, personal bankruptcy, credit counseling