The Seeker of Debt Solutions
You may feel overwhelmed by debt right now, but you’re perfectly positioned to take control! At the beginning of your journey, your options are wide open and you can educate yourself and carefully choose the right path for you.
Review Your Credit Report…
Whichever path you choose, it’s always wise to review your credit report for errors and misrepresentations. The three major credit bureaus often have differing information, so it’s important to check all of your reports.
Fortunately, you can get a copy of each free of charge once a year. You can order all three reports through www.annualcreditreport.com, or you can contact each credit reporting agency individually.
Be careful! Many websites will use free credit report phrasing, but will try to trick you into signing up for a paid program. This may even happen on the major credit bureau sites! You are entitled to a free copy of each credit report every year, without purchasing anything.
Here are some resources to help you obtain, analyze, and correct problems with your credit report:
If You Haven’t Talked to Creditors Yet…
Be prepared before you pick up the phone.
Every debt collector will want the maximum payment possible, but you’re looking for a solution to all of your financial problems, not just one. That means creating a plan before you ever make the first call.
- Calculate how much money you have available each month to put toward those past-due bills, and at what point in the month those funds will be available.
- Write down all of the debts you’re attempting to resolve, with full balances and past-due balances.
- As you talk to creditors and debt collectors, remember to deduct whatever you promise to one from your available funds before starting the next conversation.
- Keep detailed records of your calls, including the agreement reached, the person you talked to, the date and time, due dates, and any other pertinent information.
- Follow through on your plan! If you run into a snag and can’t make a payment, contact the creditor or collector right away to keep your agreement on track.
Learning More about Your Options…
If negotiating with creditors isn’t the answer, it’s time to explore other options. Unfortunately, there are pitfalls associated with many of the first options that come to mind. So, it’s important to educate yourself before acting.
Unfortunately, there are pitfalls associated with many of the first options that come to mind. That’s why it’s so important to educate yourself before you act.
Converting Assets to Pay Unsecured Debt
For example, you may be tempted to cash in retirement accounts or take out a second mortgage to pay unsecured debt. But, this type of “solution” may actually put you on shakier financial ground. For example, when you take out a loan on your home to pay off credit card debt, you transform unsecured debt into debt that is secured by your most important asset. And, the amount of your debt doesn’t get smaller.
Debt Consolidation and Debt Settlement
If you’ve been searching the Internet for debt solutions, chances are that you’ve seen quite a few advertisements for debt consolidation and debt settlement. The pitch probably sounds great, but there are things you should know before committing to either of these options.
First, debt consolidation can be very expensive. Although the new plan typically lowers your monthly payment and perhaps your interest rate, this is often accomplished by stretching out payments. That means you pay more interest in the long run—sometimes a lot more.
You can learn more about how debt consolidation works here: Is Debt Consolidation the Right Answer for You?
Debt settlement, when it’s successful, results in a lower payout amount. But, not all creditors will cooperate with a debt settlement company, and your credit may worsen significantly while the debt settlement company collects funds from you over time and negotiates with creditors.
Finally, you should be aware that there are many debt settlement and debt consolidation scams. The Federal Trade Commission (FTC) provides information on how to avoid debt relief scams:
You indicated that it might be time to explore bankruptcy as an option. For some people, bankruptcy is exactly the right tool to create a more stable financial foundation. But, it’s not for everyone. Like every possible solution, it’s important to do your homework and thoroughly understand the pros and cons for you.
This brief overview and additional resources will help you get a basic understanding of the bankruptcy process and the different bankruptcy solutions available.
Chapter 7 bankruptcy is the most common type of consumer bankruptcy, and allows many people to wipe out unsecured debts such as credit card debt, medical bills, and unsecured loans. Chapter 7 can provide a fresh financial start for those with mostly unsecured debts, but may not provide relief for people who have a lot of secured debt and want to keep the property or who have valuable assets.
Chapter 13 bankruptcy often provides a solution for people with significant secured debts, or who have too much income or property to take advantage of the Chapter 7 bankruptcy process. In Chapter 13, you create a plan to catch up past due balances over three to five years. As long as plan payments and current bills are current, creditors and collectors included in the plan can’t take further action against you.
The best way to determine whether Chapter 7 or Chapter 13 bankruptcy could be the solution for you is to talk to an experienced bankruptcy attorney.
Fight Debt Collectors Who Break the Law
Sometimes, collection agencies and debt buyers break the rules and play dirty. Federal law protects you from deceptive and abusive debt collectors. Learn more about your rights so that you can fight back when debt collectors cross the line.
If You Need Help…
That’s what we’re here for. If debt collectors are violating the law or you’re having difficulty getting inaccuracies removed from your credit report, contact Barshay Sanders PLLC to learn more about how you can fight back. You may even be entitled to financial compensation.