What to Do When in Debt

What to Do When in Debt

get out of debt

There is always a way to manage debt as long as you decide to take action. Worrying about your financial problems hardly helps in solving it, but exploring your options and coming up with a plan for the best debt help does.

The first step is to face your debt problem head on and acknowledge the fact that you need to do something about it. The next best thing to do is establish the facts and find out as much as you can about your debts. Take out all those unopened bills and list all of your debts to find out the total amount you owe. Find out the minimum payments required, too. Then, compare this number with your monthly income minus your essential expenses.

These numbers should give you a clear idea of your current financial situation. Now that you are aware of how much you owe, it is time to look at available options that will allow you to solve your financial woes. Debt settlement will provide relief from the total amount you owe and put you on the path to a debt free future more quickly.

  1. Review your current credit card terms

See if the credit card company has internal hardship programs. Try to find short-term payment relief like lower interest rates to help out while you are struggling to meet the financial responsibilities.When you realize that your debts are more than you can handle and that you’ll fall behind on payments it may be too late to consider.

If you’ve just lost your job, gotten divorced or if you have found yourself in the middle of a medical situation you may need to seek debt counseling.

  1. Seek debt counseling.

When everything gets a little overwhelming, do not hesitate to seek professional debt relief help for your debt issues. You do not have to do it on your own, and a little help can go a long way in reducing the stress of tackling your debts. Debt advisors can explain what debt relief programs are available to you and also guide you on how to budget and curb overspending habits. They can help you with a customized debt relief plan.

  1. Opt for debt settlement.

If you feel that the total amount of money you owe is totally beyond your capacity to pay, consider applying for a debt settlement program. Done with the help of a debt settlement company, this method involves negotiating with your creditors to reduce the total amount of money you owe. In place of having you pay in full, debt settlement will ‘settle’ your debts with a lump sum payment. This amount is less than the total amount of your debt. For example, if you have $10,000 in credit card debt, your debt settlement company can negotiate a settlement for $6,000. They will also design a plan on how you will make monthly payments until you exhaust the debt in the least possible time. Usually, you will have to make one fixed monthly payment into an escrow account that the company handles.

  1. File for bankruptcy.

If debt settlement is no longer an option and you’ve spoken with a debt advisor, bankruptcy should be your last resort. There are two kinds of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 solves credit card and medical debts and unsecured personal loans but excludes taxes, child support obligations, and student loan. This type of bankruptcy may cost you your second vehicle, family heirlooms, vacation homes, or any valuable collection.

Meanwhile, a Chapter 13 is a court-approved repayment plan based on your income and debts. Bankruptcy is typically reserved as a last resort as it can cause significant damage to your credit score. It stays as a black mark on your credit report for up to 10 years, affecting your chances of getting a job, an apartment lease, or car insurance in the future.

There is no single best way to eliminate debt. Carefully study your financial situation to pick the best debt relief option for you. Be proactive in managing your debt problem and seek help as needed.

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