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Americans now owe about $2.4 trillion in consumer debt, according to the Federal Reserve Bank of New York. While that sounds like a lot (it is), it represents a 1.5% decline from the previous quarter.

In addition, Americans have an average of $16,000 in credit card debt.

That’s a Mt. Everest-sized pile of debt that some folks justifiably worry they’ll never be able to get out from. But consumers in that mindset have some debt relief options they may have overlooked – until now.

A recent white paper by the San Mateo, Calif.-based debt settlement company Freedom Debt Relief suggests that budgeting and cost-cutting should be at the top of the list of any debt-relief effort. The paper does offer some helpful specifics on other ways to get from under a pile of debt:

Take strict control

Stop using credit completely – and make sure to pay off secured debt, like a car loan, first. “Borrowers then should pay as much as possible on the debt that has the highest interest rate, while staying current with other debts by making minimum payments,” the paper said. “When the first debt is repaid, consumers can use the same strategy on the next-highest-rate debt.”

Direct negotiation

If your debt problems prove insurmountable, take your case directly to creditors. “Some creditors may work out payment plans. While creditors are under no obligation to negotiate, it is often in their interest to do so, since it makes payoff more likely,” the paper states.

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Consider professional debt relief

(Note: As a debt settlement company, Freedom Debt Relief has a horse in this race) These firms can get you on a monthly debt repayment plan. “Consumers who are able to stick with debt management payment plans can generally pay off debt in approximately five years,” the paper said. “They are best suited for individuals who are facing a less-severe financial hardship than a debt settlement customer.”

Debt consolidation

Lumping all of your myriad debts into one bundle can help you organize your debt, and set the stage for you to better pay it off. There are some tradeoffs, though. “Consumers pay back 100% of the debt, plus interest,” the paper explains. “Additionally, the loan is often secured by the borrower's property, such as a home or car, which puts those items at risk if the borrower cannot pay. Beware of high fees, and check the service's reputation. [Plus], those working with a debt consolidator may sacrifice the freedom to open and use additional credit lines.”


Yup, the “B” word. But if your debt situation is truly unbearable, then bankruptcy may be the way to go, as a last resort. The paper points out that bankruptcies are harder to come by these days. “Bankruptcy reform enacted in 2005 sharply curtailed filings for Chapter 7 bankruptcy, the type of bankruptcy that eliminates most consumer debt,” it states. In addition, bankruptcy, in some situations, may not relieve you of all of your debt burden. “Chapter 13 bankruptcy filings, which require consumers to repay debt on repayment plans, are available to those whom their state determines, through its means test, have enough income to pay back at least some of their debt. (Also), repayment terms generally are less favorable than those found with debt settlement.”

It’s the holiday season – that time of year when you can really start racking up some serious debt. Stay vigilant, and if you do get into trouble, refer to the tips listed above.

They may be your best bet for solving even the thorniest debt problems.

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