- Bankruptcy – This word usually has a bad stigma surrounding it, but can be a very effective way of getting out of debt. Not without penalty, however. Filing for bankruptcy does a number on your credit score, so it is usually used as a last resort. Declaring Bankruptcy, essentially, eradicates your debt. You go in front of a judge and a trustee, and they examine your liabilities and assets to see if you are eligible.
- Sell your stuff – If you have accumulated debt and you are having trouble paying it off, it’s probably time for a garage sale. Go through your home and find anything you don’t need. Set up a garage sale and use that money to chip away at your debt. Also, if you are currently making car payments, sell your car and use the money you receive from it to pay off the loan and buy a cheaper one. (See How to Make Money on Craiglist and eBay.)
- Cut your spending – Track your spending for a month and see where all of your money is going. If you eat out 4 times a week, eat at home. If you have cable, cut the cord. If you have Netflix or Hulu, cancel your subscriptions. Also, if you have any subscription boxes, cancel those as well. There is no need to eat out that often, and use your local library to read books or rent movies and TV shows.
- Redeem your insurance policy – If you bought a whole life insurance policy, you may have some cash value you can use to pay off some of your debt. Check with your particular policy to see if there are any restrictions or penalties associated with withdrawing your cash value.
- Take a loan from your 401(k) – With a loan from your retirement plan, you may be able to pay off some debt. With a 401(k) loan, you are eligible for 50% of your account balance or $50,000, whichever is less. There could be some fees associated with this type of loan, but they vary by plan. Typically, the loan is due back within 5 years of taking it. It needs to be paid back in installments, principal plus interest. Keep in mind, if you are let go from your job you owe the entire loan within 60 days.
Conclusion
There are several radical ways to help reduce your debt. You can cut your expenses, file for bankruptcy, and even find cash from unlikely sources to get you out of debt. Each method listed above comes with its disadvantages. If you find yourself in a position where you are looking for additional ways to get out of debt, do your due diligence and way the positives and the negatives. There are various organizations that help people with their debt, including www.debt.org. Please consult a financial professional for advice on your particular situation.
Photo: openDemocracy
Jacob G. Sensiba is a third generation Registered Representative/Investment Advisor Representative at CRG Financial Services, Inc., Having grown up surrounded by wealth management. He is a licensed Registered Representative for the states of Wisconsin, Nebraska, Arizona, and Virginia. He is a licensed Investment Advisor Representative for Wisconsin. Jacob is a husband, father and self-confessed finance nerd. In spare time he enjoys family, golf, travel and personal finance.
You can also read his other articles at The Free Financial Advisor
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