Taking Care Of Your Debt Situation
You need to differentiate between adverse financial problems. For example, a financial emergency is when you experience a situation that can leave you penniless, homeless or without any significant possessions. You should separate these kinds of emergency from a threatening phone call or a letter from a debt collector.
When experiencing an emergency like these, it is crucial to act at once. You have to begin by contacting the creditor. Doing so enables you to work out a temporary solution, which can help you to keep your possessions. However, it does not always work and if it doesn’t, contacting your lawyer to negotiate with your creditor is necessary.
Face up to the Problem:
A common misconception in debt situations is that “the less you know, the less it hurts”. However, you must learn how to face your debt problems. You must be able to do this since rebuilding and repairing the credit will not happen, if you do not know exactly where your money goes or where it needs go instead.
Although it is not harmful to slightly overestimate the amount of your debt, it is always beneficial to know how much money you actually owe. You can do this by taking a look at the bills you have had. If you have thrown out your bills without even looking at them, you can still call the company and inquire about them or ask for copies.
Some creditors also use an automated reply system, which can provide the balance you owe and information regarding missed or future payments automatically, which means you do not even have to speak to anyone. Furthermore, information about your account might also be available on your creditors’ web sites. After obtaining the necessary details, add it all up, especially those overdue monthly obligations.
Options Available for Your Debts:
There are several choices available when dealing with debts. One is to do nothing. This option is probably the most popular approach used by those who are deeply in debt. Frequently, these people have a very small income and maybe no property and do not normally expect any change in their lifestyle. If you do not expect any significant income any time soon, you can consider this option.
However, doing nothing does not really help at all, so maybe you could find some money to repay your debts. You could do this by selling a major asset, like a car or a house. This is a good choice if you can no longer afford your car or house payments. Instead of waiting for a repossession or foreclosure to take place, selling the property is always a much better solution.
The proceeds you make from the sales must be put towards reducing your debt. Moreover, you should remember to pay off the liens placed by the creditors and use anything that is left to pay (something) off your other debts. However, before taking this step, make sure that you have already worked out an alternative for your housing or transportation needs.
A further way to help you pay off your debts, is to cut your expenses. This will help you not only in the repayment of your debts but also when negotiating with your creditors. Try to shrink the cost of your food by cutting out coupons, buying generic brands, buying where there is a sale on or shopping at discount stores.
However, if you cannot reduce your outgoings enough, you can always borrow money from a tax-deferred account. Tax-deferred retirement accounts, like IRA or 401(k), can be used to help pay off debts by withdrawing money from them prior to retirement. However, since you might need to pay a penalty or taxes, this should only be used as your last resort.