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9 Financial Moves to Make Before a Divorce

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

what happens to debt when you divorce

When most people first decide they’d like to file for divorce, the minutiae of their finances might not be top of mind. The psychological burden of a marriage ending can be all-consuming, making it difficult to consider any practical matters.

Plus, the costs associated with divorce — things like lawyer fees and selling one’s home — can be so complicated and overwhelming that people put off thinking about them. But making certain financial decisions prior to filing for divorce can ensure you emerge from the tumultuous process with solid financial footing.

Before filing for divorce, consider making these financial moves.

1. Take inventory of your finances.

One of the most important things you can do if you’re considering divorce is taking a comprehensive look at your finances. This includes things like your salary, any loans you have in your name, the amount you have in your bank accounts, credit card balances, retirement accounts, insurance policies, etc.

Diane Pearson, a certified divorce financial analyst and wealth adviser at Legend Financial Advisors in Pittsburgh, said oftentimes, clients come to her firm before even telling their spouse they’re considering divorce.

“The first thing that I tell them is to account for all of their assets and all of their liabilities,” Pearson said. “Just knowing what you own and what you owe can be very, very valuable.”

Patrick Nelson, a divorce attorney at Casey Nelson, LLP in the Chicagoland area, said organization is crucial when preparing for divorce, in particular, because you will need to sign a financial disclosure statement.

“I would organize your documents,” Nelson said. “When you file for divorce, there is a requirement that both parties complete an exchange — what’s called a financial disclosure statement. It’s a comprehensive document that’s signed under oath. And every county requires this.”

Nelson said in addition to a complete disclosure of assets and income, clients have to provide supporting documents, which generally includes three years of tax returns.

“Just preparing these things and getting the documents together would be helpful,” Nelson said. “Because if I’m going to be asking for these, you’re just kind of wasting time, and it’s costing you more money if I’m constantly on you.”

2. Check your credit reports and credit score.

Pearson and Nelson both advise people who are considering filing for divorce to check their credit reports and credit score. Take a look at your credit history, and understand what your score means. This step is particularly crucial if you left most of the finances in your marriage to your spouse.

“Let’s say the husband has never taken out a loan to buy a car, or has never taken [out] a loan to buy a house,” Pearson said. “If you don’t have some history, your credit score might be low.” This means that if you try to purchase a house or a car post-divorce, for example, you might not get approved in a favorable manner, Pearson said, because you don’t have the credit history.

In addition, Pearson said going through divorce can affect your credit score. “There may be joint accounts that are going to be closed,” she said, which can negatively affect your score because you will lose the credit history. “When you remove the history of a mortgage, or the history of a car loan, or things that were in joint name, it actually can send the credit score downward, just because history is what helped build that credit score.”

Pearson adds that this step can be valuable because some spouses aren’t even aware that certain loans are in their name. “Some people might want to run a credit report and make sure there haven’t been credit cards or loans taken out in their name that they’re not aware of,” she said.

3. Figure out your spouse’s finances (if you don’t know them already).

Pearson said oftentimes, the people who meet with her are clueless about the finances in their marriage. “In most relationships, you usually have one spouse that handles the financial situation,” Pearson said. “Somewhere along the line, they’ve made the decision that, ‘OK, well you’re going to pay the bills, and you’re going to handle the investments.’”

Nelson said that in his opinion, one spouse not fully understanding the financial state of the marriage is actually quite common. “Sometimes, you have one spouse who is basically in control of all the finances,” Nelson said. “And the other spouse, they just have no clue.”

Some people might not even know their spouse’s salary or the amount of their monthly mortgage payment.

Leaving the finances to one spouse, however, can prove dangerous in divorce. “When this happens, the other spouse kind of loses touch with everything the other spouse is doing, so it’s very important to sit down and try to understand what the assets are,” Pearson said.

This is one of the first things she discusses with her clients who are considering divorce, because someone needs to fully understand what has value before deciding what to fight for. “If somebody doesn’t have any financial history or background, what we try to do is help them understand what those assets are because having a checking account is extremely different than having a retirement plan.”

Pearson also said it’s important to know where the cash flow is coming from in a marriage, which means understanding how much each spouse’s salary contributes to the overall household budget.

“If you’ve got a two-earner household, understand how much of the opposite spouse’s income is being used to run the household,” Pearson said. In addition, you should discern how you will be able to financially manage your own household post-divorce without your spouse’s income.

4. Decide what’s worth fighting for and be prepared for unexpected costs.

When considering what to fight for in a divorce, it’s important to think beyond just the face (or emotional) value of an asset. Consider the potential tax liabilities, too. For example, if one spouse keeps the house, that spouse will also have to keep the mortgage.

Another unexpected expense people don’t consider is the cost of refinancing the home in one spouse’s name. Pearson said clients are often surprised to discover that when one spouse keeps the house and the mortgage has to be refinanced in that spouse’s name, it can be very expensive. “A lot of people don’t realize that has to happen,” she said.

Perhaps another asset, like a car that is already paid off, would be more valuable to you. Instead of getting wrapped up in what you think you should fight for, consider what’s actually worth it to you and your financial future.

5. Consider hiring a real estate agent specializing in divorce if you’re selling your home.

Selling a home during a divorce can be a stressful experience for many reasons, including a quicker timeline and, if the couple has kids, the need to move children seamlessly. Pam Evans, an associate broker at Century 21 Results in the Atlanta metro area, often works with clients going through divorce. Working with a real estate agent who has worked with other clients going through divorce can offer a welcome perspective.

“Moving and selling a house is just a very stressful period, so then when you overlay divorce on top of that, it’s a very volatile situation,” Evans said. “It can just send people over the edge, so I get it. I get where people are because I’ve been through it myself.”

Evans said it’s important to do your due diligence when selecting an agent.

“Interview your real estate agent carefully,” she said. “You shouldn’t be afraid to ask questions. Make sure your Realtor is asking you questions about what you’re trying to accomplish. Ask them if they’ve helped other divorced people because it is a very emotional segment.”

Even though it can be tempting to work with a family member or friend who is a new and affordable agent, you should opt for experience over all else, as the home is one of the biggest assets in a divorce. “You definitely want to go with somebody who’s experienced and empathetic,” Evans said. “People have got to understand what you’re going through and how to make it better.”

6. Be ready to have difficult financial conversations with your spouse.

Nelson said communication is crucial during divorce proceedings. Many couples find it difficult to speak during this time, but doing so could save you both stress and money.

“Unfortunately, a lot of times people who are going through this situation, they’re not able to communicate, or they don’t talk,” Nelson said. “Well, then I have to reach out to the other attorney, and say, ‘Look, can you provide this or that?’ And every time I have to reach out to the other attorney, they’re both getting charged.”

Even though it might seem impossible in the moment, having difficult conversations will prove beneficial in the future. “If you’re just able to be cordial and communicate on a basic level, [it] would be helpful and minimize attorney’s fees,” Nelson said.

7. Meet with a financial adviser, if necessary.

As a financial analyst who specializes in helping people going through a divorce, Pearson said it can always be worthwhile to consult a financial adviser. A financial adviser or even a nonprofit credit counselor can help you get a complete financial picture, which includes your assets, liabilities, income and expenses.

“You don’t have to hire somebody to do that, but if you yourself can do it, those four areas need to be addressed before you even move forward,” Pearson said.

8. Think about where you might need to cut back financially following divorce.

Not only will the process of divorce be costly, but your finances will likely be drastically different.

“People fail to realize that after you’re divorced, essentially you’re dividing the income,” Nelson said. “And you have twice as many expenses because now you have two separate households.”

Prepare yourself by thinking about where you might be able to cut back following divorce. How can you begin saving now? What could you live without post-divorce?

9. Shop around for an attorney.

Nelson recommends doing your due diligence when searching for an attorney to represent you in a divorce. Nelson advises meeting with the attorney in person for a consultation and gauging how you feel. (Oftentimes, these consultations are free.)\

“Do you feel comfortable?” he said. “It has to be a good fit. It has to be a good fit for the attorney, and for the client.”

Nelson said you shouldn’t be afraid to interview the attorney and ask specific questions. “Do they have experience? Do they know what they’re doing?”

Divorce can be a difficult, emotional time fraught with obstacles and roadblocks. Getting your finances in order prior a divorce can be one way to make the process less stressful. And in an unpredictable time, having a clear understanding of your financial picture can help you feel empowered and in control.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Friedlander
Jamie Friedlander |

Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here


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10 Money Mistakes Everyone Makes at the Beginning of the Year

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

time-barred debt

When it comes to one’s finances, bad decisions can have a snowball-like effect. If you start off the year forgetting a payment here and there, being disorganized with your taxes or failing to contribute to your retirement accounts, you’re setting yourself up for a disorderly financial life in 2019.

There are a handful of common financial mistakes people make at the beginning of the year that can be prevented with just a little effort and foresight. Start the year off on the right foot by avoiding these common missteps.

1. Not having a plan in place.

Luis Rosa, a certified financial planner with Build a Better Financial Future in Henderson, Nev., said one of the biggest financial mistakes people make at the beginning of the year is not planning ahead.

“People just fail to plan overall sometimes,” Rosa said. “[If] you don’t have a plan, then you’re just like a ship without a rudder … at the beginning of the year, sit down and see what the goals are that you want to accomplish.”

Kristi Sullivan, a certified financial planner based in Denver, said she often gets phone calls at the beginning of the year from people who might have contacted her months ago, but never followed up for an appointment. “They want to start the year off right,” Sullivan said.

Whether it’s by yourself or with the help of a financial planner, figure out what you want to accomplish in 2019. Do you want to save more money? Pay off a significant amount of student loan debt? Purchase your first home? Build up your emergency fund? Whatever your financial goals are, January is the perfect time to set them.

2. Not reassessing your automatic savings strategy.

Sullivan said January is the perfect time to reassess any automatic savings you’re making, and increasing them, if possible. “If you put another 2% in your 401(k) at the beginning of the year, that’s done for you,” she said. “You don’t ever have to think about it again — you implemented a good savings habit.”

You could also increase the amount you move each month from your checking account to your savings account. “Just set up those automatic good behaviors so you don’t really have to think about them, and watch those actions build over time,” Sullivan said.

3. Ignoring your retirement account contributions.

Rosa said people will often fail to realize that certain retirement account contribution limits have changed. For example, the Roth IRA contribution limit is now $6,000 as opposed to $5,500, so somebody who has a Roth IRA could raise his or her monthly contributions at the beginning of the year to plan ahead, Rosa said. (For 401(k)s, the limit will change from $18,500 to $19,000 in 2019.)

Automate your retirement savings at the beginning of the year to ensure you’re putting away the maximum amount possible each month. Rosa notes that on the IRA side, you do have until the tax deadline to contribute to the prior year. “But life gets in the way,” he said. Organizing your contributions in January will give you peace of mind for the year ahead.

The beginning of the year is also a great time to reassess your 401(k) allocations, Rosa said. For example, you might have initially allocated 60% for stocks and 40% for bonds in your portfolio.

“During the year, things change, so maybe stocks went up and bonds went down,” Rosa said. “At the beginning of the year, it’d be a good idea to go back in there [and] see how your account performed for the year.”

If necessary, you can make any changes that will get your portfolio closer to what you want.

In addition, Rosa recommends taking advantage of your company’s employer match if you haven’t already.

“Sometimes, it’s a good idea at the beginning of the year to be like, ‘OK, this will be one of my goals: to increase to at least the employer match,'” Rosa said. “And just get it done starting with the next pay period.”

4. Putting off your taxes.

There’s no harm in getting an early start on your taxes. Gary Schaider, a certified public accountant and manager at Weiss & Company LLP in Glenview, Ill., said one way you can be proactive is by getting organized.

Account for anything that might affect your tax situation that you didn’t get in the mail from the government. This could include things like business expenses, charitable contributions and anything else that might be deductible.

5. Not adjusting your tax withholdings.

Schaider said one of the immediate things you can do in 2019 is look at your tax withholdings. “One of the things I think most people don’t look at enough is what you’re doing as far as your income tax withholding at your job,” Schaider said.

This is imperative because of the new tax laws and the ways in which rates, exemptions and withholding amounts have changed, he said. “People need to revisit company exemptions they’re claiming on their W-4 and what their withholding looks like,” Schaider said.

Make sure you’re not taking out too much or too little. “You should probably do that early in the year rather than late in the year when it’s too late to do anything about it,” Schaider said.

In addition, sometimes people will have a major life event, like a marriage, divorce or the birth of a child, that can affect their tax bracket, Rosa said. If this applies to you, fill out a W-4 form in January to make any necessary adjustments.

6. Not checking your life insurance beneficiaries.

Perhaps you got married in the previous year. Did you remember to change your life insurance beneficiary from your sibling to your spouse? Or maybe you had a child or got divorced. The beginning of the year is a great time to double-check that your beneficiary is correct.

“I’ve met several people that have their brother or sister on their life insurance, and they get married and just completely forget to add their spouse,” Rosa said. “So it’s a good time to reflect on what changed this year.”

7. Staying disorganized for yet another year.

Sullivan said the new year is a great time to finally get your accounts organized. Perhaps you have an old 401(k) and various other accounts scattered about. Take 2019 to get your money organized.

“Streamline it and consolidate accounts,” Sullivan said. “That can be one [thing] that people really want to do — almost like cleaning out their closet, [but] organizing their finances.”

8. Not paying off debt.

Right after the holidays is the perfect time to finally begin paying off debt. Perhaps you overspent during the holidays. Or maybe you’re just sick of mindless online shopping. Take January to get a debt repayment plan in place.

“You’re sick of shopping, you’re sick of spending money,” Sullivan said. “So it might be kind of a natural time to sort of hunker down and pay off some credit card debt.”

Take January to create a debt payoff plan for the year ahead. You’ll thank yourself come 2020.

9. Not reviewing your investments.

January is a great time to look at your investments and make any necessary changes.

“I think at the beginning of the year, it’s good to look at what your money is invested in,” Schaider said. “Is it all in the market? Is it in cash? Is it in safer things or riskier things?”

You should definitely look at your investments if you had a major life change in the previous year. For example, perhaps you had a child and you don’t want to be as risky with your investments in 2019. “You might want to change your strategy,” Schaider said.

10. Biting off more than you can chew.

Although the new year can leave you feeling motivated, be sure you don’t set lofty goals that will be difficult to achieve. After all, 80% of people fail to maintain their New Year’s resolutions by the second week of February.

“Don’t think that you’re going to take January and make sweeping, overarching changes to your financial life,” Sullivan said. “Pick one or two things that you can really accomplish, pat yourself on the back and move on to the next.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Friedlander
Jamie Friedlander |

Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here


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Pay Down My Debt

Pacific Debt Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You’re in significant debt and have decided it’s finally time to pay off your balances. But you don’t know where to begin. You feel overwhelmed and are starting to think you might need the help of a professional.

There are companies out there that can help you negotiate your debt, and these are called debt relief or debt settlement companies. For a fee, debt relief companies will attempt to negotiate your debts with your creditors on your behalf.

One of these debt relief companies is Pacific Debt.

What is Pacific Debt?

Headquartered in San Diego, Pacific Debt offers debt settlement for people with over $10,000 in unsecured debt. Below, we’ve explored the ins and outs of Pacific Debt so you can decide whether or not it’s the right debt relief firm for you. Pacific Debt is accredited by the Better Business Bureau (BBB) and is an accredited member of the American Fair Credit Counsel (AFCC).

Breakdown of Pacific Debt

Below, you’ll find more details regarding Pacific Debt’s services, fees and requirements.

Services offered

Debt settlement/negotiation

Minimum debt required

  • $10,000

  • At least $500 per account

Credit check

Yes (Soft Pull)

Debt settlement timeline

12 - 48 months

Consultation fees


Cancellation fees

Contact Pacific Debt with any questions.

Service fees

15.00% - 25.00% of total debt enrolled

Types of debt accepted

Unsecured debt, which includes:

  • Credit card debt

  • Medical bills

  • Unsecured loans

  • Personal loans

  • Retail debt

  • Debt from repossession

  • Accounts in collections

Note that private student loan debt is excluded.


  • Better Business Bureau

  • American Fair Credit Council

  • International Association of Professional Debt Arbitrators

  • Accredited with


  • A+ from BBB

  • 4.5/5 on

  • 9.4/10 rating on

Service limitations

  • Private student loan debt excluded

  • Some unsecured debt, such as consumer finance loans, payday loans, medical debts not in collections and legal judgments might not be included

Free tools and resources

Customer service

  • Assigned a personal account manager who works with you during the entire negotiation process

  • Throughout the process, client care specialists can also help you with things like coping with debt collector calls and staying organized

Who’s eligible?

To work with Pacific Debt, you must meet the following requirements:

  • You have at least $10,000 in total debt.
  • You have at least $500 in debt per account.
  • You struggle to maintain minimum payments on your accounts.
  • You live in one of the 28 states (including the District of Columbia) that Pacific Debt does business in, which includes: AL, AK, AZ, AR, CA, DC, FL, IA, ID, IN, KY, MA, MD, MI, MN, MO, MS, MT, NC, NE, NM, NY, OK, PA, TX, UT, VA, WI.

What are the benefits and risks of Pacific Debt?

If you’re considering working with a debt relief company, it’s important to weigh the potential risks and benefits. By having your debts negotiated, your credit score will likely take a hit. But if you can stay with the debt relief program, you will not need to file for bankruptcy and will be well on your way to becoming debt free in just a few years.

Before deciding whether or not you’d like to work with Pacific Debt, take a look at these potential benefits and risks.



Your debt could be reduced by as much as 50%.

Your credit score will likely take a significant hit.

You’ll work with the same account manager over the course of the program.

Life after debt settlement could be difficult because your credit score will be much lower.

There are no upfront fees. You don’t pay anything until your debt has been negotiated.

Participating in a debt relief program means you must stop making minimum payments on your accounts, which could lead to phone calls from debt collectors and ensuing stress.

You could be debt free in less than five years.

This program isn’t worthwhile if you are primarily looking to negotiate private student loan debt.

How much does Pacific Debt cost?

The fees for Pacific Debt are based on the total debt enrolled in the program. Fees range between 15.00% - 25.00% depending on the state you live in. No fees are collected upfront. All fees are paid when you make your monthly debt settlement payment.

Fees are collected once a debt has been successfully negotiated, the consumer has agreed to the negotiation and the first payment has been made.

Compared to other debt relief firms, Pacific Debt’s fees skew low. In fact, Pacific Debt is ranked the top company based on lowest fees from U.S. News & World Report.

How long does the program take?

On average, the program takes between two and four years, though it could be as quick as one year. Pacific Debt states that clients who stay on track with the program and make all of their monthly deposits pay approximately 50% of their enrolled balance before fees, or 65-85%, including fees. However, this range (before fees) can be anywhere from 20-55%.

Although no savings are guaranteed as not all creditors will settle, Pacific Debt has negotiated with myriad major banking institutions. Below are a few examples from Pacific Debt regarding how much they were able to negotiate certain clients’ debts down.



Original Balance


PNC Bank








Capital One




Is Pacific Debt safe to use?

Generally speaking, customers have positive reviews about Pacific Debt and its services. The company has an A+ rating with the BBB. In addition, the company’s reviews on other websites are high, with the majority of reviewers happy with the services they received. On, the company has a 4.5/5 rating based on over 500 reviews. In addition, they have a 9.4/10 rating on

There are 37 positive reviews on the BBB, many of which praise the company’s trustworthiness, responsiveness, excellent communication and professionalism.

There are three complaints for Pacific Debt with the BBB, one about a consumer who stated no progress had been made after nine months in the program and another who believed there was confusion surrounding the fee structure for the program.

Overall, Pacific Debt appears to be very safe to use for those looking to settle their debt.

How do I sign up for Pacific Debt?

  • Request a free consultation either online or on the phone by calling 800-909-9893.
  • A representative from the company will explain how the debt relief program works and can help you figure out whether it’d be a good fit for you.
  • If you think Pacific Debt is the right fit for you, you can enroll in the program with no upfront cost.

What to expect after signing up for Pacific Debt

  • Upon enrolling in the program, you will be connected with a personal account manager who will be your primary contact throughout the negotiation process. This initial contact typically happens in about 90 days.
  • You will stop making all of your minimum monthly payments on your delinquent accounts.
  • Your personal account manager — also referred to by Pacific Debt as a debt counselor — will analyze your debt, monthly expenses and income.
  • This counselor will then help you figure out a payment plan that will work for you.
  • Now, the negotiation begins. Your counselor will negotiate on your behalf.
  • Each time your counselor negotiates a bill, he or she will get in touch with you. You can then choose whether to accept the settlement. If you accept the settlement, Pacific Debt’s fees will be deducted starting with your first monthly payment.
  • Once all of your debt is resolved, you will receive copies of all of your settlements.

Alternative methods to pay down debt

Debt settlement isn’t for everyone. Perhaps you are interested in maintaining your credit score and don’t want to see it suffer. Or maybe your total debt is just a few thousands dollars, and something you could realistically pay off in a couple of years. Or maybe your debt is so significant that you don’t anticipate being able to pay it off even if it’s negotiated to a lower amount.

Whatever the case may be, there are other ways to pay down debt than working with a debt relief company. Below, we’ve explored some of the most common methods for paying down debt.

Debt consolidation

Debt consolidation involves combining all of your debts and paying them off in one monthly payment using a personal loan. Debt consolidation is particularly common for people with significant credit card debt, though it can be used for all forms of unsecured debt.

It works like this: You take out a personal loan, also referred to as a debt consolidation loan. You then make monthly payments on the loan that are dispersed to your various creditors. If you need help figuring out whether a personal loan for debt consolidation is the right path for you, consider using LendingTree’s personal loan tool. You may be matched up to five differnet lenders after you fill out a short online form.


  • Interest rates are fixed, not variable, so you know exactly how much you’ll be paying each month.
  • You don’t need an exceptionally high credit score to obtain a personal loan. However, if your score is too low, you might not secure a good interest rate.


  • You’re not reducing the actual amount of your debt.


Credit Req.

Minimum 500 FICO

Minimum Credit Score


24 to 60


Origination Fee



on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.

Debt management plan

A debt management plan involves working with a nonprofit credit counselor to organize and pay off your debt while also learning about good money habits. It works like this: You simply make a payment to the credit counseling agency each month who will then disperse your payment to your various creditors.

This method can often be a good decision for those whose credit score is too low to qualify for a personal loan with a good interest rate.


  • You will learn about how to avoid making the same financial mistakes again while paying off your debt.
  • The fees for these services are often low.
  • Your credit score likely won’t take a dip, as these agencies often have agreements with financial institutions stating that if a consumer sticks to the plan, the institution will not report negative information to the credit bureaus.


  • Although some negotiation is possible, you’re likely not lowering the total amount of your debt.
  • If your debt is significant, you might not be able to realistically pay it off using this strategy.

Find a nonprofit credit counselor near you using this online database from the National Foundation for Credit Counseling.

DIY debt settlement

Many consumers are unaware that they can negotiate debts on their own. By negotiating their debts, consumers can often obtain a discount or a flexible payment plan.

Debts can be negotiated once they are delinquent, though you will likely have the most luck if those debts are already with a collections agency. You can attempt to negotiate with a debt collector by starting with a low amount you could realistically pay off. From there, negotiation will likely go back and forth in a process that could take months, if not years.


  • You won’t have to pay any fees for using a third party like a debt relief company.


  • You might not be able to negotiate the debt down as much as you could with the help of a professional.
  • This process will require a decent amount of your time.


Bankruptcy should not to be taken lightly. It is only a wise decision for those in significant debt they don’t anticipate being able to escape from using any of the above strategies. There are two forms of bankruptcy: Chapter 7, in which all of your debts are forgiven and you begin from scratch, and Chapter 13, where you stick to a repayment plan.

If you have significant delinquent debt you cannot pay off and don’t envision ever being able to pay off, you might want to consider bankruptcy. You might also want to consider filing for bankruptcy if you are at risk of losing your home (this only works if you file Chapter 13), want to guard your retirement savings or have experienced a significant life event like a major illness or job loss.


  • Upon emerging from bankruptcy, you will be completely debt free and have a clean slate.


  • Your credit score will take a major hit.
  • You will struggle to secure credit in the future.
  • If you file for Chapter 7, you will literally be left with nothing. All of your assets will be seized.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Friedlander
Jamie Friedlander |

Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here


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