11 Tips for Paying Off More Than $100,000 in Debt

A few years ago, Travis Pizel and his wife, Vonnie, found themselves in crisis. The Rochester, Minnesota, couple had good jobs and lived well, eating out frequently, buying what they wanted and taking vacations to water parks with their two children.

But a letter from their credit card company advising them of higher payments forced them to confront the truth: They had accrued $109,000 in credit card debt during their 13-year marriage. Despite a household income of about $100,000, they couldn't afford higher payments.

"We had essentially been racking up credit card debt from the moment we said 'I do,'" Pizel says. "It was just a big snowball rolling down the hill that kept getting bigger and bigger."

They're far from the only Americans who have found themselves faced with huge debts. Credit cards, student loans, auto loans, home equity lines of credit -- it's easy to discover that you've gotten yourself in over your head with numbers so large you don't even want to face them.

That's the wrong approach, says Beverly Blair Harzog, author of "Confessions of a Credit Junkie" and "The Debt Escape Plan," which will be published next month. "The first thing you need to do is own the debt," Harzog says. That means telling yourself "I did this. I'm not a victim, and now it's my job to pay it off."

The first step, she says, is writing down exactly how much you owe each creditor, with interest rates and minimum payments. The next step is to come up with a budget, determining how much it costs you to live and what expenses you can cut to find the money to pay off your debts.

It's better to tackle debts sooner rather than later because consumers with solid credit have more options -- flexibility to negotiate lower interest rates or secure a balance transfer credit card -- than those whose debts have been turned over to collection agencies.

"If they feel they're just one paycheck away from being in crisis, that's a good time to call," says Thomas Nitzsche, a financial educator in St. Louis for ClearPoint Credit Counseling Solutions.

Pizel and his wife enrolled in a debt management (not debt settlement) program, which cost them $50 to start and $55 a month. They paid off the $109,000 in 55 months and estimate that the program, which negotiated lower interest rates on their cards, saved them $30,000 in interest charges.

They also made some big changes to their lives, including communicating a lot more about money with twice-weekly consultations on spending, saving and finances.

"We didn't really come to grips with how much we had to change our lifestyle at once," Pizel says. Dining out was curtailed, and vacations became fewer. They started planning meals and sticking to grocery lists. "We looked at every monthly bill," he says, asking one question: "Does that bring value to our lives?"

What works for one person won't necessarily work for another, and most people need to experiment to find the best budget and debt-payoff method, says Harzog, whose new book focuses on helping people find the methods that suit their personalities.

"You have to change your behavior, and that takes time," she says. "It's not going to happen overnight, where you have this epiphany and everything falls into place."

Here are 11 strategies from Harzog, Pizel, Nitzsche and other experts on how to attack big debts.

Calculate what you owe. List all your creditors, including the minimum payments and interest rates. Plan to attack one debt at a time, making minimum payments on all the others. Some advocate the "snowball" method, starting with the smallest debt. Others start with the debts that have the highest interest rate. Either way, you want to throw as much money as you can each month at your target account, then move to the next. Yes, there's an app for that. Jackie Beck at TheDebtMyth.com created Pay Off Debt, an app for the snowball method.

Cut expenses. If you're lucky, you might be able to pay off your debt by cutting down on vacations, dining out, gym memberships and shopping. If that's not enough, you may need to consider moving to a smaller home, switching your kids from private to public school, selling your car or moving in with family.

Make a budget. You can create your budget on paper or use tools such as Mint.com or YNAB.com (You Need a Budget). Some people like the envelope system, where you use cash for everything, creating envelopes for each expense category plus savings. Start by writing down every cent you spend. "If you can make yourself do this for three or four weeks, you'll be surprised at where some of your money's going," Harzog says.

Earn more money. That could mean getting a new job that pays better, taking a part-time job on the side or freelancing. You may also be able to sell belongings to generate more cash.

Quit using credit cards. Many clients are reluctant to give up credit cards because of the loyalty programs, Nitzsche says. But if you're paying 10 percent interest, the 2 percent cash back you receive is a net loss.

Transfer balances to get a lower interest rate. This is a good option for people with solid credit, as long as you can pay off the balance during the introductory period. Take any balance transfer fees into account. While you can sometimes refinance your mortgage or take out a home equity line at a lower interest rate to pay off credit card debt, remember that failing to make those payments can endanger your home.

Call your credit card company. If you're current or not far behind on payments, you may be able to negotiate a lower interest rate or smaller minimum payment. Ask to speak to the hardship department or a supervisor. "Take action quickly," Harzog says. "Don't wait until you're three months behind to call."

Get counseling. Find a nonprofit company that is accredited by the National Foundation for Credit Counseling, has positive customer reviews and a good rating from the Better Business Bureau. Most companies will provide a free initial consultation. After that, you can decide whether you need a credit management plan, in which the agency negotiates with your credit card companies, takes one payment from you and then pays your creditors. These nonprofit agencies, which used to be known as consumer credit counseling services, can also help with student loans and mortgage modifications.

Consult an attorney. This is an especially viable option if you're considering bankruptcy or have been sued. A credit counseling agency may help you find one.

Scrutinize medical bills. Medical debt makes up 52 percent of the bills sent to collections, according to a study last year by the Consumer Financial Protection Bureau. Make sure your bills are accurate, and that the insurance company has paid its share. Once you've determined what you owe, ask for financial aid, a payment plan or a discount. "A lot of people don't know they can apply for financial aid with a hospital," Nitzsche says. Even if the answer is no, the hospital may offer a payment plan or write off some of the bill.

Beware of debt settlement companies. These for-profit companies usually collect money upfront, tell you not to pay your bills and wait for the debt to become delinquent in hopes of negotiating a settlement. This may or may not work, and the result could be a lawsuit or a lien against your home. Many companies take customers' money and then disappear. "There are situations when settling a debt may be a good idea, but I don't recommend going to a debt settlement company," Nitzsche says. Start with a credit counselor, who may recommend other options to settle debts.