Financial Stress affects many Americans these days. Too many bills, not enough money.
There are many things in life worth worrying about. Money is one of them, but it should not be high on the list. Your health, your family, your freedom – things like this should always rank higher.
When someone is having problems paying their bills, they should consider them in a rational fashion. One approach is to look at your overall financial situation. Consider all of the bills, and find out how much you owe (as well as the amount of the monthly payments). Make up a budget, and check it carefully – are you able to pay all of these bills.
In some cases, doing a good job of budgeting will give you the answer. For other individuals, who have bills that they cannot pay, and lack any way to either increase their income, or decrease your expenses, other options should be considered:
1. Contact the creditor.
Some creditors will allow you to lower your payments, or make concessions on interest rates.
2. Talk to a debt counselor.
WARNING: there are a lot of scams out their. Beware of companies that charge large fees, or promise unreasonable results. I can recommend Advantage Credit Counseling as a legitimate debt counseling company. They are the only such company I know with a local office in Blair County. They can be reached at 866-699-2227, 917A Logan Blvd., Altoona, PA 16602, Advantage Credit Counseling.
An honest debt counselor can help to arrange payments with multiple creditors, particularly when you need some time to stretch out the payments. They cannot help you unless your budget has a surplus: some money that is available to pay down debt, after allowing for your basic living expenses.
3. Consult an Attorney
An attorney can assist you in many ways. During a legal consultation, you would discuss the individual debts, to see if they are legally enforceable, and also your overall financial situation, to help you determine whether you should try to settle a particular debt, or seek an overall solution, such as filing a Bankruptcy Petition.
3. Debt Settlement.
This works for some people, particularly where they have the resources to offer a lump sum, but cannot afford to pay in full. How much the creditor will accept depends on their policies, and the account history. There are several pitfalls involved with debt settlement, which you should be aware of:
A. There may, depending on individual circumstances, be a federal tax liability resulting from “Cancellation of Debt Income.”
B. If the source of the money is your retirement account, you will also pay tax (plus a penalty) when you withdraw the money, and are also sacrificing your future.
C. Settling one debt may not solve the problem, if another creditor will not work with you.
4. Filing a Bankruptcy Petition
This often the only way to deal with all of the debts, and get a fresh start. Consumers usually file one of two types of bankruptcy:
Chapter Seven Bankruptcy asks the court for a discharge from your debts. This works well for unsecured bills such as credit cards or personal loans. Secured debts, such as mortgages and car loans, can usually be reaffirmed, which means that you will continue to pay them, but are allowed to keep the property.
Chapter Thirteen Bankruptcy is a payment plan. You make your best efforts to pay over a 3 to 5 year period, and then get discharged from the rest. In addition to catching up on unsecured debt, Chapter 13 can also be used to propose a plan to cure a default on a mortgage.