How To Erase Debt

Couple with debt issues

In today’s economy, the subjects of debt repair and erasure seem to be the key stress management topics. There is no grand eraser but there are some approaches to debt erasure. You can file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code or enter into a debt consolidation program.

Under Chapter 7, you do literally remove all debts unless you have tangible assets, i.e. mortgage-free house or car, paid for. If you have a mortgaged house, payments on a car, or other secured debts than these debts cannot be erased. However, you can rewrite these debts for smaller payments and a change in the period of time they are to be paid. In a secured debt, the creditor holds the ownership of that item until the debt is paid in full.

When filing a Chapter 13 bankruptcy, you are agreeing to pay your debts on a monthly basis. The payments are interest free and the amount of the payments is prorated dependent on the balances of all of the debts to be paid. The debts will eventually be paid in full.

Another approach in answer to the question how to erase debt is the debt consolidation process. This is similar to filing a Chapter 13, but the creditors can continue to call and harass you for payment, whereas if you are in Chapter 13 they cannot. In the debt consolidation program you list all of your debts and they are prorated in accordance with the total of debts owed. As in Chapter 13, the payments will be smaller but in debt consolidation they are not always interest-free.

The creditor will sometimes want to make arrangements to settle the debt for a smaller amount without adding all of the interest. In agreeing to do so, the debtor is not paying the debt off and still owes the remaining balance. The credit report companies will be advised that this is a settled debt rather than a paid debt.

These are some of the approaches to erasing debt that a debtor can use wisely and safely. But as in any endeavor to erase debts, the debtor should approach any program with caution. A strict analysis of the debts and the income which the debtor will use to pay these debts is necessary. Balancing these options with the income will let the debtor know which program is the best option.


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