In debt? You’re not alone. Americans have amassed more debt than ever before, according to recent statistics. Credit card debt has reached an all-time high of over $1 trillion, and non-revolving loans approach $3 trillion. The average monthly car payment is up to $499, and almost six million people owe more than $50,000 in student loan debt. Sadly, one in 11 people with credit card debt don’t believe they’ll ever be out of debt.
If these statistics sound a lot like your situation, don’t lose hope. There are as many ways to manage debt as there are to accrue it. We’ll help you sort through your options and determine the best way for you to manage your debts and build a more secure financial future.
The Path Out of Debt
The journey to becoming debt-free can be long and trying. With diligence and commitment, however, you can be successful. Follow these steps to take control over your finances once and for all.
Set a Budget
We know this advice sounds cliché, but we mention it because it works. Understanding your budget is an important first step to becoming debt-free. Start by listing all your debt, income, and expenses. Look for opportunities to reduce your expenses or even increase your income. Once you know how much money is coming in and going out each month, you can calculate how much is left over to make payments against your debts.
Negotiate with Your Creditors
If you have recently suffered extenuating circumstances such as a job loss, divorce, or medical problems, you may be able to negotiate some relief with your creditors. Come armed with what you know you are able to pay, explain your situation, and be prepared to offer possible solutions, such as changing the payment term, forgiving interest, or waiving late fees. Some creditors, such as credit card issuers, may allow you to settle your debt for a lump sum that is less than what you owe.
Pay Your Bills on Time
Set reminders for yourself so you never miss a bill payment, or use auto-pay if possible. Late fees are a big setback when you’re trying to manage your debt, but they are completely avoidable. A history of late payments could cause your interest rate to go up as well.
Pay at Least the Minimum
Although making the minimum payment isn’t going to get you very far when it comes to paying off your debt, it keeps your debt from growing. Missing payments could put your account into default and make it much more difficult to catch up again.
Be Wary of Debt Relief and Consolidation Companies
Although some debt management plan coordinators are legitimate credit counseling agencies, many are, unfortunately, out to scam people who are already down on their luck. We hear countless horror stories about debt consolidation and debt relief companies who pocket their customers’ money and never pay the creditors. If you’re not cautious, working with one of these companies could put you in a worse place than you started.
Although there used to be a stigma around filing for bankruptcy, most people now recognize that it is often the best option to manage your debt effectively. If your economic situation truly is dire, you should not feel ashamed of taking steps to improve your finances. Remember that the various types of bankruptcy were set up precisely for this reason—to help people get out of debt.
In Chapter 7 bankruptcy, you may have to give up some of your assets to repay some of your debt. This could include your house or vehicle if you have significant equity in either. However, we find that our clients are often able to keep their homes and cars. Most of your debt will be wiped out.
In Chapter 13 bankruptcy, you will work with the court to set up a plan to repay your debts over three to five years. At the end of that period, any remaining debt will be discharged. In order to keep your car and home, you will need to continue making payments on them, including any back payments owed.
Do You Need Help?
Chapter 7 or Chapter 13 bankruptcy might be the solution you need to reclaim control over your finances. If you need help determining the right path for your situation, the bankruptcy attorneys at Benson Law Firms can provide expert, personalized guidance every step of the way. Please contact us today to schedule your free consultation.