With today’s economy and the high jobless rate, many people are having financial difficulty and are unable to make ends meet. At such times, people may stop making the minimum payment on their credit cards and loans, or even worse, stop making payments completely. That is the worst thing you can do if you are trying to eliminate your debt and get back on your feet. It will destroy your credit, making it that much harder to get out of debt. If you find yourself in such a situation, you need to take action. To do nothing at this point can have dire consequences, including liens against personal property or salary garnishment. What action you decide to take depends on your personal circumstances.
One option would be to consider bankruptcy. Many people are hesitant to file bankruptcy because they know how detrimental it is to their credit rating and that it can be reflected on your card report for up to 10 years. In addition, when you file for bankruptcy, it becomes public record for anyone to see. Unfortunately, if you are so deeply in debt that you are unable to make reasonable payments to your creditors, then bankruptcy may be your only choice.
Another option is to seek the services of a credit counseling agency. These agencies are non-profit organizations that are partially funded by creditors. Payments are made to the credit counseling company, who then makes the payments to your creditors. The balance due is not reduced nor is the interest waived; however, creditors generally lower their interest rate. A major downfall is that if you miss just one month’s payment, you may be removed from the program and your creditors will once again raise their interest rates, putting you back at square one.
A final option is debt negotiation companies. These companies are not funded by banks or creditors. They offer services to negotiate a settlement of your debt for less than the balance owed. Your debtors are willing to negotiate a settlement because, unlike bankruptcy, they will receive at least a portion of the money you owe them. Another plus is that if you use a negotiation service, that information remains private and does not become public record. Also, your credit report will indicate that your debts have been “paid as agreed” whereas in bankruptcy it will indicate “defaulted.” Therefore, it is easier for your credit to rebound from settlement negotiations than it is from bankruptcy. The types of debt that can be negotiated are generally unsecured debts, such as credit cards, personal loans, medical bills and the like. Some non-negotiable debts are auto loans, mortgages, taxes, child support and alimony, and federally funded student loans.
Once you have weighed the pros and cons of debt negotiation, if you decide that it is the right choice for you, make sure you do your homework to find the best debt negotiation companies available. Then contact them and ask questions. You should also check the companies out with the Better Business Bureau to ensure that no complaints have been lodged against them.
Having financial difficulties can be very stressful, as well as embarrassing. It is difficult to admit there is a problem and to seek help. However, once you have fallen behind on your payments, it’s time to take action. Unfortunately, debtors often deal more favorably with a third-party acting on your behalf than directly with you. A professional will also have contacts and resources that you will not have at your disposal. Therefore, seek the advice of a professional to decide your best course of action. Whether it’s an attorney, a credit counseling agency or a debt negotiation company, once you make the decision and take that first step toward resolving your debts, you will breathe easier knowing that you have taken control and that there is an end in sight.