Self Repayment
Assess your financial situation, prepare a repayment plan according to your budget and negotiate with the creditors on your own to reduce your debt.

Debt Consolidation
Debt consolidation is a way by which you can consolidate unsecured debts into a single manageable payment. The purpose is to negotiate with your creditors and reduce the interest rates or waive late fees so that you're able to manage your debts better.

• What debts can I include in the consolidation program?
  Debt consolidation program includes unsecured debts such as unpaid medical bills, credit card debts, utility bills, store cards, gas cards, and personal loans. It does not apply to secured debts.
• How do I know if an account is in collection?
  Your credit report can tell you if your account is with the creditor or sent to collection. You can pull your credit report from any or all of the credit bureaus such as:
• www.experian.com
  www.transunion.com
  www.equifax.com

Debt Management
Debt management plan (DMP) is a way by which a credit counseling agency helps you to pay off debts through reduced interest rates and payments. With a debt management plan, you can avoid paying extra charges for late payments.

• What debts can I include in DMP?
  Unsecured debts such as credit cards, medical bills, personal loans, gas cards, utility bills, department store cards and repossession loans can be included in DMP. But secured debts like mortgage or car loan are not allowed.
• How long does a debt management plan last?
  A Debt management plan lasts for 3-4 years within which your debts are paid off. The credit counselor will estimate how long you'll take to complete the payoff.
• How do I know that creditors are paid?
  You will receive a monthly statement which shows how much is paid to each of your creditors and what amount of debt is left to be paid.
• Can creditors take legal action while I'm on DMP?
  Your creditors can take you to court even if you're enrolled in DMP. However, your payment history under the DMP will serve as proof that you're repaying debt.
• Does debt management hurt credit score?
  Your creditors may report to the credit bureaus that you are on a DMP. Thus, your credit report may show a comment which states that you're repaying debts through a credit counseling agency. The comment remains there till you pay off the account in full. However, it doesn't hurt your score.
• Does the payment in DMP remain same?
  The payment in a DMP may or may not change depending upon your financial situation. If your financial situation improves, payments can be raised to reduce debt balance faster.
• Can I use credit cards while on DMP?
  You cannot use credit cards and incur more debt while on DMP. The credit counseling agency may ask you to sign an agreement in this regard. They may also close or suspend your lines of credit. However, an emergency card is allowed at times.
• Does debt management affect buying a home or car?
  If you're buying a home or car with a secured loan, you'll have to be on DMP for at least 1 year without any late payment. The best thing is to check out the lender's guidelines in this regard.

Debt Settlement
It is an option by which you can reduce your debt amount by 40%-60% of the outstanding balance. Thus, debt settlement (debt negotiation or debt arbitration) allows you to pay much less than what you owe.

• Is debt settlement a good option?
  Debt settlement is a good option in the sense that it reduces your total debt amount by 40%-60% of the outstanding balance. However, it drops down your credit score by maximum 50 points.
• How long will it take to settle my debts?
  It takes 2-5 years to settle your debts depending upon how much you can pay on a monthly basis.
• How do I choose the right debt settlement firm?
  Check if the settlement firm is accredited by the BBB and has a decent rating. Verify if it is a member of the Trade Association of Settlement Companies (TASC).
• Why do creditors agree to settle debts?
  Creditors find that it's profitable to settle debts rather than selling them off to collection agencies at a comparatively lower price.
• Debt settlement firms will negotiate to lower balances. However, this service means hidden costs. Debt consolidation firms will charge a fee on the percentage of debt you have in addition to the amount they “save” you on loans—assuming you can get any debt forgiven. In addition, income tax must be paid on the debt forgiven, and it hurts your FICO score.

Bankruptcy
Bankruptcy is an option through which you can wipe out debts by selling off your assets or making payments as approved by the court.

• Is debt consolidation better than bankruptcy?
  Yes, debt consolidation is better than bankruptcy. The former has a positive impact on your credit score whereas the latter brings down your score by around 250 points.
• Why should I avoid filing bankruptcy?
  You will lose some of your assets if you file bankruptcy Chapter 7. Your credit score will also go down by several points. Bankruptcy will remain on your credit report for 10 years. As such, it's better to avoid bankruptcy.

Credit Scores
Credit scores (or FICO scores) are used to assess applications for credit, rent, insurance, and employment.

• It affects your ability to get loans and the interest rates on those loans.
• Higher scores lead to better interest rates lenders.
• The three big credit bureaus in the United States are Equifax, Experian, and TransUnion. While they are each required to provide one free credit report a year, the credit score itself is not free.