When people apply for and receive a credit card, mortgage or new car loan, they don’t do it with the belief that they might find themselves financially strapped a year or two later, but it happens. It happens to those considered most prepared to responsibly repay their debts and it happens to those whose credit histories are stellar. The point is – we simply don’t know what the future holds. It’s the unpredictability of life that gets us every time.
If you’ve found yourself in a world of financial trouble, there are options and it’s important to remember you’re not alone. There are four options most consumers generally consider. While bankruptcy should be anyone’s last resort, it is one of those options. Credit counseling, debt management programs and debt consolidation efforts are the other three generally preferred methods of regaining control over debt.
As mentioned, bankruptcy really should be anyone’s absolute last choice. The repercussions of filing a chapter 7 or 13 (chapter 11 for businesses) can last for years. Just as a less than ideal credit history can prevent someone from getting a job or buying a home, a bankruptcy can do this too. In fact, many companies feel a bankruptcy equates to a desperate job candidate who, if hired, can pose a risk to the company as a whole. Is it right? Of course not, but a reality nonetheless.
If you find yourself overwhelmed and believe bankruptcy is your only option, you’ll need to consult an attorney who specializes in bankruptcies in your state. Each state law varies, so be sure you understand all of the legalities and repercussions. That said, it’s also important to remember it’s not the end of the world and you, like millions of others, can recover.
Many consumers choose credit counseling as a way to get their financial habits back on track. A reputable credit counseling service employes experienced and certified personnel who know how to help clients develop and then implement new budgets so that you can maintain your finances in a more productive manner. You’ll learn of tools and resources you might not have even known about and you’ll also gain skills that can only help you in the future.
It’s a great option, if you choose a company with a stellar reputation and tried and true success methods. You’ll need to schedule an appointment and bring with you everything the counselor asks for, including bank statements, pay stubs and recent account statements for everything – including your utilities. You might be interested in paying down credit card debt, but you’ll also need to present a complete picture of your finances – even those accounts you are able to pay each month.
Debt Management Programs
This is another fine alternative and put the tools at your disposal to not only find your way back from credit problems, but thrive in the future. You’ll want to complete due diligence to ensure the company is reputable. Not only that, but what might be right for one person isn’t right for another, so while a friend might have good intentions when he tells you this was his “cure all”, it might not be the best option for your needs; this only reiterates the importance of doing your research.
Remember your goal is to find a way back – and no matter what you choose, it’s not going to be easy, but realizing you’ve chosen the wrong source only extends your problems. It’s impossible to say how long one person’s journey will ultimately be, but on average, it usually takes around four years for debt management programs to complete.
Many say this is perhaps the riskiest of options, next to bankruptcy. The reason being is that it requires another loan. Many people have found great success by moving their credit card balances to a new card that has a 0% intro rate for balance transfers. For some, this is exactly what they need to get their debt paid down. They’re not paying any interest for a determined amount of time and this alone, especially if they currently have three or four or more credit cards – each with their own APRs – can save hundreds of dollars each month.
Other consumers who have other debt to consider might choose a debt consolidation loan from their bank or even a refinance of their home where they take out some or all of their equity. Again, this only shifts the debt, but it shifts it to a place where it’s more manageable.
There are no easy “outs”, but once you have a game plan lined up, you are well on your way of getting these burdens off your shoulders.