The bills keep piling up. Money going out is exceeding money coming in and you are in financial trouble, perhaps for the first time in your life. You should not become paralyzed by your situation, which will only make matters worse. But what should you do? The good news is, you do have options.
Initial steps to take
You must be realistic about your current situation. That means you and your spouse must sit down, list all your debts and what the minimum payments are, along with what the due dates are. Next, you need to start calling creditors to talk to them about your situation. While this will be unnerving and perhaps embarrassing for you, creditors have dealt with many people in your situation before. The earlier in the process you can do this, the more flexibility you may have to work out some kind of a revised arrangement.
Debt relief action plans to consider
After you have taken initial steps, it's time to consider which of the following strategies may work best for you:
Consumer credit counseling. The best of these are nonprofits and they will likely recommend a debt management plan which will include setting up a repayment budget and then working with creditors on your behalf to see if they will be amenable to a revised repayment plan. In exchange, you may need to surrender all of your credit cards as a show of good faith for the short term.
Debt consolidation. In some cases, you may be able to consolidate all of your debts into one manageable account, eliminating higher interest rate debts and lowering your monthly payments. You may be able to tap a home equity line of credit or get an unsecured personal loan.
Debt settlement. Another option is to hire a debt relief company who will negotiate a lump sum payment to your creditors, often at a fraction of what you owe. Be aware that going this route will have a negative impact on your credit score.
Bankruptcy. This is the most dramatic and the most effective way to achieve debt relief. However, it will have the most long-lasting impact on your personal finances. You should consult an attorney if you are considering this option.
The Hixson Law Firm serves clients in Mansfield, Arlington, Grand Prairie and other nearby Texas communities.