7 On Your Side: Ways to reduce your debt

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The average American household is more than $7,600 in debt, so 7 On Your Side looked at how you can reduce that debt. (KGO-TV)

The average American household is more than $7,600 in debt. For those in deep financial trouble, there's something you can do right now. 7 On Your Side looked into how you can reduce that debt before paying it off.

Whether its taxes you owe to the IRS or credit card debt, there are things you can do to reduce what you owe. Here are a couple of examples.

Pauline Blacksmith commutes regularly from Benicia to San Francisco. Her ex-husband is a contractor and crosses Bay Area bridges regularly to get to various jobs.

The couple shared a joint account and accumulated thousands of dollars in FasTrak tolls and penalties.

Link here to check out the IRS debt settlement program

"I went to FasTrak and negotiated it down," Blacksmith said.

She pleaded financial hardship and FasTrak agreed to reduce her debt from $4,500 to $1,000.

Negotiating your debt is a common practice used by debt counselors, but Abby Ford of Consumer Credit Counseling of San Francisco warns it isn't easy.

"If you're severely delinquent, if you have a line of lump sum you can offer, they may be willing to accept it. But there are no guarantees," Ford said.

Your hardship may be involuntary. Being laid off is an example of an involuntary hardship. Quitting your job is not. But there are no hard and fast rules.

"They told me it was open for negotiation and that I had to fill out some paperwork, which I did," Blacksmith said.

Ford says the key is to reach out for help early, before you're delinquent. She advises, "Let them know what's wrong. Tell them what you're going through. It may not be a lump sum settlement, but they might be willing to work with you in other ways."

You may be able to negotiate a reduced interest rate or lower your monthly payment until you're out of the hardship. It takes persistence and patience, but in the end, it's worth it.

"You have to work at it. It's not something they're going to give you right away," Blacksmith said.

So will this work for you? FasTrak tell us it will settle on a one-time basis at a reduced penalty, if the customer agrees to maintain their account in good standing going forward.

Related Topics:
finance7 On Your Sidedebtmoneysave moneyfastrakbillsbusinessBeniciaSan Francisco
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