There are many ways you can accumulate debt; fortunately there are nearly as many ways to get out of debt. The problem is finding the best solution for your situation.

Bankruptcy is one option for addressing truly overwhelming debt. However, bankruptcy should be a last resort because of the financial effects it will have on your life. The bankruptcy code, overhauled in 2005, now makes it more difficult for consumers to obsolve their debt with a Chapter 7 filing. Therefore, it is more likely you would qualify for Chapter 13, which establishes a repayment plan of three to five years and stays on your credit report for at least seven years. As a result, you should talk to a bankruptcy lawyer or bankruptcy professional before making such a life altering decision.

Credit card debt consolidation is yet another method of debt reduction. Many consumers transfer a balance from one credit card to another to avoid paying high interest rates on the old card. This can be successful but often leads to more debt. The reason many people don't see any benefit to transfering a balance to another card is the exact reason they have a balance, compulsive spending. Unless you change your credit card usage, another card will only give rise to another opportunity to accumulate debt. Try our credit card debt calculator to see how long it will take to pay down your current credit card debt.

Debt consolidation is a form of debt relief that seeks to salvage the consumer's credit. Instead of filing bankruptcy, the consumer, typically, combines several debts into one loan. Yet, the benefits of debt consolidation may not always be realized by those who enter a debt consolidation program. In theory, if you have decent credit now but have multiple debts, then a consolidation loan with a lower interest rate would be beneficial. However, many consumers with multiple debts lack the good credit to receive a low interest rate that would make debt consolidation wise.

Debt settlement is a newer form of debt relief that has boomed due to banks and creditors refusing to negotiate with consumers. If you try to contact your credit card company for a reduced interest rate because you are falling behind on your payments, they could actually raise your rates because they have reason to suspect there is a problem. However, a debt settlement company can approach a large bank or creditor with millions of dollars worth of debt and ask the credit institution to settle the debt at a fraction of the original amount. The key is the debt settlement company has professionals and a bulk amount of debt with which to negotiate.

A home equity loan is another way consumers seek debt relief. The basic principle behind using a home equity loan is to refinance your home and use the surpluss value, equity, to repay debts. However, since you have now taken a second mortgage on your home, you have put your unsecured credit card debt (meaning credit card debt is not backed by property) onto your home loan. Thus, if you fall behind on your mortgage payments, now you don't just incure bad credit, you lose your home.

Snowballing debt is a method of debt relief that is successful because of psychological and financial benefits. The process starts by itemizing debts. Then the debtor sets an amount they will pay for each debt. Once the smallest debt is repaid, the debtor then applies that amount to the next smallest debt and so on until all debts are paid. The psychological benefit is that the individual quickly sees progress by paying off the smallest debt. The financial reward is being debt free.