Before taking any action on how you will tackle your bad credit problem, it is a good thing to consider the various options available to you.

Your situation is unique. Credit repair does not work for all. Sorry, but this is just the truth. Whoever tells you otherwise would be lying. Here are some options to consider:

1. Do nothing: Yes, this could be the best option for someone deeply in debt, who has an already strained budget, and just does not want to take the bankruptcy route. I did this for years, and though collectors were driving me nuts, I had to just brave it out until my situation improved. I actually had to stop picking up phone calls from unfamiliar numbers, which caused me to also lose some opportunities that might have helped.

Caveat: This option is for someone who is “judgment proof”. This is someone who is a liability even to sue as the chance of collecting is next to zero.

2. Find ways to earn extra cash. Yes, there are ways to earn some extra cash for those who look around and are not scared to do some work, or don’t consider some things as beneath them. For instance, women who have a room to spare in their homes can run a child daycare. Or they can take in overnight, children of parents who have to work at night. If you’re good with computers you can teach, for a fee, non-computer-literate people learn how to use a computer, or offer computer maintenance services. The possibilities are endless.

3. Sell an asset: My sister had to sell off her beloved shiny almost new SUV and buy a used Sedan. She almost cried (I think she did in private), but the option was best for her under the circumstances. Today, she is glad she did. If she had not, she would still be deeply in debt, and with an old SUV. Weigh your options. Selling off your home may be hard to take, but it is better than to get cash back (if you’re lucky) from foreclosure.

4. Home Equity: For older home owners, you can use your home equity to pay off some (or all) of your most crippling debts. Again, weigh your options carefully as you don’t want to lose your home (and perhaps still be in debt).

5. Debt Consolidation: A professional debt consolidator could help you by negotiating with your creditors on your behalf, for more comfortable. A good debt consolidator will also help you come up with a budget that allows a bearable or comfortable lifestyle.

Note: Debt consolidation is considered more or less like bankruptcy by some creditors. The difference is that it does not wreak havoc on your credit for ten years. Also, you will be required to close your revolving accounts – which will hurt your credit initially – as well as make a pledge not to establish new lines of credit until your debts are paid off.

Warning: Some debt consolidation companies are scam.

6. Negotiate: You can negotiate with your creditors and/or debt collectors for lower monthly payments or a lower lump sum. Some creditors will be happy to be receiving something than nothing at all. This is perhaps the best option as you can also negotiate non-reporting or removal of adverse information as part of the bargain. Note that lower monthly payments might not be indefinite. Most creditors, especially of open/active accounts, will insist on a specific time span, after which the payments will return to normal.

Also be aware that if any part of your debt is written off, it may be considered income and therefore taxable.

This option is best for those whose credit situation is not already in the intensive care unit, so to speak.

7. Chapter 7 Bankruptcy: Filing for bankruptcy is an option, however a hard one to take. A chapter 7 bankruptcy allows you to wipe out your debt and start over. It is also the most devastating to your credit file. This requires you to give up most your assets.

Since October 2005, it is much more difficult (almost impossible) to file for a Chapter 7 Bankruptcy as congress passed what I consider draconian and anti-consumer laws, in the name of The Bankruptcy Abuse Prevention Act. More on this in a future post.

8. Chapter 13 Bankruptcy: This is also referred to as the wage-earners bankruptcy. It allows you to pay back what you can over time (usually 3 to 5 years), while you get to keep most or your assets.

Discover insider techniques and strategies for repairing your credit. Check out: Credit Repair Bible today.

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