If you're carrying a lot of debt, you might feel overwhelmed and depressed because you have no idea how to pay it off. In fact, the more you think about it, the more helpless you feel about your situation.

Still, it's not as hopeless as you might think. There are many ways to reorganize your debt to get you respite, giving you either partial or full relief.

If you research the topic online, you’ll come across three common options proposed to reduce or eliminate debt. In this review post, we will help you decide if you should seek debt-relief, pay down your debt, or file for bankruptcy.

Option #1: Ask for Debt Relief

Debt-relief methods can reduce the outstanding principal amount, lower the interest rate, or extend the term of your debt.

Sometimes creditors will consider a debt-relief measure you propose if your account is in good standing and you have a good payment history. For example, they may be open to negotiating a lower interest rate to allow you to pay off your debt completely because it saves them the time, money, and effort it takes to pursue repayment. They may have reached a point where giving you debt relief is easier than pressuring you to pay it off after you explain to them that you simply don’t earn enough to do so.

Interestingly enough, debt relief isn’t just restricted to individuals and small companies. Debt forgiveness or partial mitigation can occur even when debtors owe hundreds of thousands to millions of dollars. For instance, a creditor may offer relief to a sovereign nation, a state, or a municipality.

Refinancing or Debt Consolidation

While complete debt forgiveness is rare, partial relief is often possible. A creditor might be open to restructuring and offer you some relief rather than take the risk of you going bankrupt and completely defaulting.

Here are two common examples of debt relief:

Refinancing
A creditor may refinance your mortgage at a lower interest rate to give you debt relief.

Debt Consolidation
A finance company may offer you a personal loan to consolidate all your debts.

Here, at Memphis Associates, for example, we have been able to offer our clients debt relief by combining multiple high-interest loans into a single low-interest loan.

Larissa from Las Vegas, NV, explained how debt consolidation helped her sort out her credit card debts, “I really thought I had made the right decision: I transferred all my balances to a 0% card only to find out 6 months later that the new interest would be more than I had been paying before. I was so mad. And, so scared. When I received the offer from Memphis Associates I knew this was the choice I should have made long ago. Thank you Memphis Associates for being true to your word.”

Mitchell, from La Jolla, CA, talks about how debt consolidation helped him after his job crisis, “My job got furloughed, then eliminated. I was freaked out. I thought saving my cash and putting everything on my cards was a way to keep ahead of things. Well, we all know how this story ends. I was in a heap of trouble until I called Memphis Associates. They didn't judge my errors in judgment, they just helped me get back on my feet. Bless you, Memphis Associates."

Option #2: Pay Down Your Debt

Another way to handle debt is to pay it down. You can do this by earning more or raising the money.

How to Earn More

If you can increase your monthly payments on your loans by earning more money, then you could increase the debt repayment percentage. By making larger payments, your debts will not be accumulating as much interest each month.

Here are some ways that you could increase your earning ability:

  1. Take an online course. We now live in a time where it’s possible to learn marketable skills from home at a reasonable price through online learning. You could take a skills-training course to increase your earning ability. You could then use this knowledge to get a promotion at work or apply for a better paying position in another company. You could also simply take a course on how to improve your job-hunting skills.
  2. Ask your employer to pay for your education. If you’re working for a progressive employer, there may be in-house training that will upgrade your current level of skills or your employer may even be willing to pay for you to go back to school as a part-time student.
  3. Work more hours. You could work more hours at your current job if it offers overtime pay. You could also start a side hustle or get a part-time job. One drawback of this strategy is that it’s not sustainable. Working a full-time job and then working extra hours will eventually become exhausting.
  4. Learn to invest. You can also make money by putting your money to work for you. Instead of learning a new skill, you could spend your free time learning how to invest. For example, you could learn how to trade in stocks, FOREX, or commodities. You could start investing by saving money from your paycheck or borrowing money.

Raise the Money

You can also pay off your debts by raising money. Here are some ways to raise enough money to reduce or eliminate your debts:

  1. Sell high-ticket items to reduce your debt. You could advertise items in the newspaper or sell them online on eBay or Craig’s list. Collectibles, for example, often have great resale value.
  2. Save enough money from your paycheck or other income sources. Develop a habit of saving. Even a small amount set aside adds up over time.
  3. Use the money that you receive to pay off your debt. For example, if you get a large tax refund, use it to pay off your creditors.

Option #3 File for Bankruptcy

If you can't get debt relief because your creditor refuses to negotiate and you cannot get any support from a financial institution or a government agency to consolidate, then you may have to file bankruptcy.

Although this is a convenient way to get rid of all your debts, it is also a drastic solution because it has many downsides. Consequently, you should only use it if you have run out of all other options. If, for instance, your medical bills far exceed your earning capacity or ability to borrow a low-interest loan or get any financial assistance, then bankruptcy will give you a new start in your financial life. A chapter 7 bankruptcy will entirely discharge all your debts.

It's possible for you to reduce or eliminate your debts and find peace of mind. You could use a debt relief method or a strategy to pay it down. Even if neither of these possibilities is viable, you still have another option: filing for bankruptcy, which is something you should only consider if you have no other way to handle your debts.