What Can You Do to Get Out of Major Debt?

Aggressive budgeting can reduce debt.

Aggressive budgeting can reduce debt.

Getting on sound financial footing is one of the biggest challenges new couples face after tying the knot. Young couples often have student debt, auto loans, credit card debt and personal loans, which can make it difficult to save money for the future. Escaping major debt takes time and discipline, but it can set you on the path to achieving financial freedom.

Strict Budgeting

Strict budgeting is best way to get out of debt without hurting your credit score. Cutting back on luxuries like entertainment, electronics and going out to eat can save money that you can use to pay your off debt. If you are a compulsive spender, destroying your credit cards may help you avoid adding to your debt. It is important to plan your budget with your spouse or partner, even if you keep your finances partially separate, so that you both understand your goals and plan of action.

Raid Savings

Couples with cash savings or assets of significant value have a leg up when it comes to getting out of debt. Tapping into a savings account, selling an investment or selling off a valuable asset can give you the cash you need to reduce a debt quickly. If the rate of return on an investment is less than the interest rate you are paying on a debt, getting rid of the debt is the better financial option. For example, if your savings account pays 2 percent interest, but your credit card charges 15 percent interest, you are better off reducing the debt than committing money to savings for such a low rate of return. You should still keep a reserve of emergency cash that you can use to pay for things like unexpected car repairs and living expenses in the event of losing a job.

Debt Management Plans

If your debt is so large that you can't take it on through self-budgeting, you can consider a debt management program or DMP. Under a debt management plan, you work with a credit counseling organization to create a structured repayment plan with your creditors. The counseling company collects debt payments from you, which it uses to pay your unsecured debts. During negotiations with your creditors, credit counseling organizations can help you get reduced interest rates, fee waivers and other concessions that can make it easier to pay off your debt. Be wary of any debt plans that promise dramatic reductions in the amount you owe or charge you money up front; scam artists sometimes prey on people who are knee deep in debt.


In some situations, debts may be so large in comparison to income that they are almost impossible to pay off. For those with crushing amounts of debt, bankruptcy is an option to get debt-free. Chapter 7 bankruptcy requires you to sell off most of your assets to pay creditors what you can. Under Chapter 13 you pay back creditors over three to five years with what is left each month after paying for necessities. Both plans wipe out your debt in the end, but bankruptcy is usually considered a last-resort option because it severely damages credit scores, making it difficult to get future loans and credit at reasonable rates. It is possible for one spouse to declare bankruptcy apart from the other, which can spare the non-filing partner's credit score. If you have joint debts or cosigned debts, an individual bankruptcy can still negatively affect the non-filing spouse.

About the Author

Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.

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