For most consumers, overwhelming debt is usually the compounding of denial, credit card use, and an unexpected event that leaves them crippled. With the looming national debt crisis, the collapse of the mortgage market, and the widespread economic downturn, it is time to face reality and take hold of your finances. An honest assessment of your debt can help you regain financial stability and secure long-term independence from your creditors.
Young people in Tennessee and nationwide are racking up student loan debts, using credit cards to cover what they cannot afford, and quietly racking up debts they may never afford to pay off. Whether you are just starting out, early in your career, or facing retirement, here are some first steps to confronting your debt:
- Make an honest assessment. For many debtors, payments are too large to cover considering income and other expenses. Determine what you can actually afford and whether or not it is feasible to continue making payments.
- Contact lenders. If you find that you are unable to pay down debts without assistance, contact your lenders and identify your options. You may be able to negotiate a lower interest rate and reduce a monthly payment.
- Consider bankruptcy. Bankruptcy may seem like a scary alternative, but it could free up your resources and give you more financial power in the long-run. It is a legal and legitimate way to reduce or eliminate unmanageable debt. A Chapter 7 will allow you to wipe out unsecured debt. A Chapter 13 gives you the ability to reorganize your debts and establish a payment plan. You can also stop foreclosure and any legal actions taken by creditors through bankruptcy.
Though credit will be affected by bankruptcy, you can quickly restore credit overtime. Bankruptcy will also help you put an end to creditor harassment, stop creditor action, and protect your rights. An experienced bankruptcy attorney can help determine if bankruptcy is the right option for you and your family.
Source: The Wall Street Journal, "Confront Your Debt," Rachel Louise Ensign, June 23, 2012.