There are a few things you can do to get out of debt without actually paying off the balance. You can transfer the debt to a 0% APR credit card, take out a personal loan, or negotiate with your creditors.
There are many options available for those struggling with student loan debt. Two popular choices are the Teachers Loan Forgiveness program and the Public Service Loan Forgiveness program. Credit card debt can be more difficult to deal with, but there are still options available such as debt settlement programs or filing for bankruptcy.
There are a few ways to get financial relief, but each comes with its risks. It’s important to understand how they work and weigh the pros and cons before deciding which is best for you. You may find that repaying what you owe is the best choice to preserve your financial health.
Here’s How You Can Get Out Of Debt Without Paying Anything
There is no one-size-fits-all solution to dealing with debts. The best course of action depends on the type of debts you have and your circumstances. Before making any decisions, it’s important to understand the implications of non-payment and the potential long-term consequences.
Getting Out Of Student Loan Debt Without Paying
You may be able to get out of student loan payments through various programs, depending on your loan, job status, and sometimes even the school you attended. Eligibility for these programs may be determined by one or more of these factors.
- Income-driven repayment plans: There are several repayment plans available that can significantly reduce your monthly payments for 20-25 years. After that, the remaining loan balance is forgiven. This can be a great way to eventually get out of debt, but it will take a long time to get there. Additionally, you may have to pay taxes on the forgiven amount, although this is currently paused until 2025 due to the pandemic.
- Public Service Loan Forgiveness: The Public Student Loan Forgiveness program is a great way for those who work in the public sector to get their student loans forgiven. After you make 120 qualifying payments while working full-time for a qualifying employer, the rest of your direct loans will be forgiven. “While pursuing Public Student Loan Forgiveness takes less time than following an income-driven repayment plan, your employment options will be limited,” says Tayne. “The good news? Any forgiven balance will not be considered taxable income.”
- Teacher Loan Forgiveness: You may be eligible to have up to $17,500 of your Direct Loans or Stafford Loans forgiven after five years of teaching at a low-income elementary or secondary school, or working at an educational service agency.
- Perkins Loan Cancellation: Different types of professionals are eligible for Perkins Loan cancellation or discharge. These include individuals such as firefighters, law enforcement officers, and educators. Cancellation can occur over five years, while discharge may be granted in cases of bankruptcy, death, or disability.
- Closed school discharge: There are certain circumstances under which you may be able to have your federal student loans discharged. For example, this could happen if your school closed while you were still enrolled, or soon after you withdrew.
- Discharge options: In the event of death, permanent disability, or bankruptcy, your loans may be discharged. This is rare, but it could happen.
There are a few options available to those with defaulted loans. While it is not possible to have a defaulted loan forgiven, it may be possible to qualify for a loan discharge.
Without Paying Your Credit Card Debt, Here’s How To Get Out Of It
Debt can be overwhelming, but there are options available to help get your finances back on track.
- Stop paying your credit card bill: There is a way to get out of credit card debt, but it may not be the best choice. You can stop making payments and let the debt go to a collection agency. This will dramatically lower your credit score, but there is a statute of limitations for how long creditors can sue you for the debt. In most states, this ranges from three to ten years. You might be liable for the debt later on, but skipping payments is an option. However, it is not advisable because it will make it difficult to borrow money in the future and you will be hounded by creditors and collection agencies.
- Debt settlement: There is no surefire way to get out of debt, but there are options available to help. One such option is debt settlement, which involves negotiating with your current creditor (or collection agency) to pay less than what you owe. “Debt settlement is an agreement between you and your creditor where the creditor agrees to accept less than the amount owed to satisfy the debt. Amounts typically fall in the range of 50-80% of the balance,” said Katie Bossler of GreenPath Financial Wellness. “You can negotiate your settlement or hire a lawyer to negotiate on your behalf.” While there is no guarantee that debt settlement will work, it is worth exploring as an option to help get out of debt.
Getting Out Of Debt Through Bankruptcy
Filing for bankruptcy may feel like you’re starting over, but it doesn’t have to be the end. There are different types of bankruptcies, and depending on which one you choose, you may not be responsible for all of your outstanding debt. So before making a decision, explore all of your options to see what’s best for you.
- Chapter 7: When you file for Chapter 7 bankruptcy, some of your assets may be sold to pay off your debt. This means you could lose your home and personal belongings. After a few months, your remaining debt will be discharged; however, Chapter 7 usually does not cover student loan debt or child support.
- Chapter 13: Chapter 13 bankruptcy allows you to set up a court-ordered repayment plan to pay off your debts. After a certain amount of time, usually five years, any remaining debt may be discharged. This process can take longer than other methods of repayment and will result in a bankruptcy filing on your credit report.
Bankruptcy can have a lasting impact on your financial health, so it’s important to carefully consider your options and outstanding debt before filing. Once you file for bankruptcy, debt collectors are not allowed to attempt to collect the debt or continue collection activity. However, the bankruptcy filing will remain on your credit report for up to 10 years.
Not Paying Debt Isn’t That Good Of A Solution
There are several negative consequences to walking away from the debt without paying it off. These can include:
- Poor credit
- Difficulty borrowing money in the future
- Harassment from creditors and collection agencies
- Lawsuits
- The increased cost of borrowing money in the future
Are you aware of the importance of having a good credit score? It’s not just about getting favorable interest rates or insurance premiums. A low credit score can affect employment, housing, and more.
“Defaulting on payments, collections, and bankruptcies will crush your credit score,” said Bossler. “In some states, you could get sued by creditors, have wages garnished, or have assets seized.”
Avoiding payment does not make the debt go away. You’re still responsible for the outstanding balance, even though you may not be making the payments directly.
Bankruptcy Alternatives
There are several things you can do to avoid bankruptcy. Here are some alternatives to consider:
- Ask for assistance: There are a few things you can do to ease your financial burden during these tough times. First, reach out to your lenders and creditors to see what options are available for lowering your monthly payments or interest rates. You may also qualify for temporary relief with forbearance or deferment for student loans. Additionally, see what hardship assistance your credit card issuer offers for other types of debt. Finally, ask friends and family for help, should you need it.
- Get professional help: There are many ways to get help with your debt, but one option is to contact a nonprofit credit counseling agency. These agencies can work with you to create a debt management plan. Under this type of plan, you will make one monthly payment to the agency, which will then use those funds to pay off your debts.
- Supplement your income: It’s time to get out of debt. To do that, you may need to make some changes in your life. You may need to get a better-paying job or start a side hustle. You may need to sell some of your possessions to cover the outstanding debt.
- Take out a debt consolidation loan: Debt consolidation can be a great way to simplify your finances and potentially save money on interest payments in the long run. By consolidating all of your debt into one loan, you can make managing your debts easier and may be able to get a lower interest rate.
Final Thoughts
Debt relief options that don’t require repayment can be tempting, but they may not be worth the potential negative impacts in the long run. Short-term benefits may not outweigh the long-term consequences of these methods.
There is no one-size-fits-all answer to the question of how to get out of debt. The best approach for you will depend on your circumstances. However, there are some general pros and cons of different approaches that you should consider before making a decision.