When you're heavily in debt, it can be kind of like having a dark cloud hanging over your head every day. Getting rid of that debt is probably the No. 1 thing on your mind the majority of the time.
So, what are your options? Well, they vary depending on your circumstances.
If you own a home and still have good credit
Homeowners may have an option or two that other people don't when it comes to debt relief. If your credit is still stable, you can take a home-equity loan to cover your debts or do a cash-out refinance of the home in order to roll all the debt into the mortgage -- which lowers the amount you have going out of pocket each month.
Unfortunately, if your credit has already nosedived, that won't be an option -- even if you do have equity in your home.
If you have a good job and a steady income
You may qualify for a Chapter 13 bankruptcy. This kind of bankruptcy requires regular income in order to meet the qualifications.
Unlike a total bankruptcy, a Chapter 13 plan allows you to pay off all or a portion of your debts over time. The trustee for your case essentially takes control and decides which of your debtors gets how much of your disposable income in installments that can last from three to five years. This is a good option for people who are just in over their heads but who still have a comfortable income and want to keep the majority of their assets. It can also help you avoid foreclosure.
If your financial struggle is related to job loss, disability or other major struggles
A Chapter 7 bankruptcy is probably better if you are living on a very fixed income, like Social Security or disability payments of some kind. It totally wipes out the majority of debts (there are a few exceptions, such as child support) in a relatively short period of time and is usually over within a matter of months. If your house is in foreclosure, however, you may not be able to save it -- and you do sometimes lose luxury items like boats, second cars and the like.
When debt is clouding your mind, talk to an attorney about your choices.