This economy has many in financial ruin. Many individuals have lost their jobs, and the unemployment rate stands at well over 8%. For those that are lucky to still have a job, wages are stagnant. Because of this and the remnants of the mortgage crisis, many individuals are having a difficult time staying current with their bills. In addition, the ballooning costs of medical care and the astounding number of consumers without insurance only makes matters worse. If you find yourself getting behind in your payments and not seeing a way out, whether due to a loss of a job or emergency medical expenses, it’s easy to lose hope. This post addresses some approaches you might consider if you’ve found yourself in a situation where you are past due on your balances and need to find a way to dig yourself out.
There are a couple options for people that are in significant financial trouble.
1. Do Nothing: This is certainly an option but hope is not a strategy. By not engaging in the issue and remaining in denial of your financial insolvency, you are just waiting to be sued by impatient creditors. Add to that the legal costs if you do get sued and you can see why doing nothing is a poor option. Doing nothing will really only make matters worse.
2. Contact all creditors: With the mortgage crisis still being sorted out, there are many programs sponsored by the federal government to help modify loans that are underwater or that consumers are having trouble paying. For instance, the Making Home Affordable program will be in effect through the end of 2013. You can call 1-888-895-HOPE for more information on this program and to learn about other resources. Beyond the mortgage landscape, many creditors may be willing to work with you and lower your interest rate if you contact them. After one of my personal credit cards defaulted to 32% after a missed payment, I was able to contact the credit card company and negotiate a reduction. Negotiating reductions in interest rates and modifying the terms of loan agreements with creditors can really help balance your budget.
3. Consider debt consolidation: If you have a lot of debt and are getting contacted by many collection agencies, your debt may already have been sold. In this case, contacting a debt consolidation company may get you the help you need to stay afloat. These services offer free financial counseling and reduce the number of collection calls that you will receive. They will help you structure a payment plan that will work within your budget and allow you to pay your bills.
4. Bankruptcy: If all of these options fail, you can always consider bankruptcy. Bankruptcy protection has been a saving grace for millions of Americans that are in way over their heads. Bankruptcy can eliminate much of your debt and put you in a position to get a fresh start. While this process will reduce your credit score, it is not the credit bomb that many fear. Many are able to rebuild their credit within a few years.