Having debt is as American as apple pie, but too much debt can create stress, and lead to many problems: Collection Calls, Lawsuits, etc. If you need help with debt problems, the best advice is to sit down with an experienced attorney to review your options.
Its Only Money
This may seem obvious, but understand that this is just about money. It isn’t about your health, or your children, or anything else that is really important.
The Type of Debt Matters
There is a big difference between secured debts – things like a mortgage, or a vehicle loan, and unsecured debt, such as credit cards or personal loans. Tax debts are another category. One way to look at debt is to think about what happens if you don’t pay. Not paying a credit card will hurt your credit rating, and might lead debt collection calls or a lawsuit. That all sounds pretty bad, but if you don’t pay your rent or your mortgage, you will need to find a new home.
Make a Budget
Making a budget is simply a matter of adding up your income, and subtracting your expenses. This sounds easy enough, but we often under or over-estimate these expenses. Be honest with yourself: don’t exaggerate your expenses, but don’t leave things out, either. I have found when clients bring in budgets they often leave out things such as automobile maintenance. It doesn’t happen every month (thankfully) but sooner or later your car will need new tires, or brakes, and your budget needs to allow for that.
Don’t leave out the “little” things either. I often bring my lunch to work, but if I don’t have time to make a sandwich, I’ll end up buying something. One method that works for some people is to keep a diary, writing down everything you spend money on.
Consider Your Options For Dealing with Debt
After you’ve made up a budget, you should know what you can afford. If the result isn’t going to get you out of debt, there are some good alternatives:
Debt Negotiation or Settlement
Many creditors will accept less than the full amount due, in exchange for prompt payment. Others will negotiate the interest rate, or amount of payments. This can be a solution, for those who either have the funds to offer a settlement, or room in the budge to make payments. But, beware of the Debt Settlement Trap!
Defending Against the Claim
If you are sued in court, the creditor will need to prove that you are the person who owes this debt, they have calculated the amount correctly, and they are the current owner of the account (if they aren’t the original creditor). Depending on the type of debt, there is a statute of limitations – a period of time the creditor has to begin a lawsuit. If you have been served with a lawsuit, you should consult a lawyer.
There are two types of consumer bankruptcies: Chapter 7, and Chapter 13. What Chapter is Right for Me? A bankruptcy attorney can review your situation, and help you decide which chapter is best for you.
In either type of bankruptcy, it may be possible to discharge many of your debts, including things such as credit cards, personal loans, utility bills, or medical debts. The goal is to provide a fresh start, free of most, if not all of your debts.
Some debts are more difficult to discharge, such as student loans, taxes or support obligations. Secured creditors, who have a mortgage or lien on a home or vehicle, have some special rights in that property. Often, a debtor in bankruptcy will choose to continue paying for those items.
Bankruptcy isn’t the first choice for most of my clients, but it is an effective tool for those facing debt problems.
The Federal Government requires that I state that I am a debt relief agency, and help people file for bankruptcy.
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