Five Ways To Deal With Debts

Published on: Sun, Sep 13, 2009

Classified as: Debt

Credit card has always been more of a nightmare, rather than a blessing for most people. Because of its easy usage and access, people never keep track of the amount that they waste away, until it drags them into a sea of debt. During this time of recession, many Americans have felt the impact of their personal debts, with regard to credit cards.

The best way to sort this out is to face up with the debt as soon as possible, because, the more it is delayed, the more problem it may cause you. The famous author of, A Survival Guide to Debt: How to Overcome Tough Times & Restore Your Financial Health by Mitchell Allen discusses strategies to deal with debts.

credit-card-debt

Understanding and cut spending

The first and foremost method to tackle with debts, is to analyze what you are spending. Each month keep a track record of your income statement, listing down, what you have spend where. Usually, though we may not realize it, but the minor spending such as a $10 lunch snack accumulates into major expenditure.

Save on what you can, list out your needs and your temptations. Work out on lists like groceries, vegetables, transportation, housing, bills and even servicing debts. Once all this is done, you may be able to pluck out unnecessary expenditure and get a surprising change in your savings account.

cut spending

Manage your debt

Incase, savings don’t help out, there are three main ways to get around managing your debt.

a). Credit Counseling:

In this phase, guidance is provided to help you plan out ways to pay the debts. Debts are divided into monthly payment sessions, with a low interest rate. If paid regularly, the affects on credit cards could be deterred.

The counselors can be found at the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies, but before you go out to one, make sure you have an eye for their fee, and that they can relate to your lenders well so that your debt is handled thoroughly with care.

managment chart

b). Debt Settlement Company:

A tough exchange for credit card debtors. These companies charge a high amount of fee, just to lower your debt charges, but they are not obliged to legally present you in court, if you are unfortunately sued for the debt. A very hard option for already heavy debtors, but as they say, when in debt, any way is a way.

c). Home equity loans:

The last and final resort. Very simple. Exchange your home in return of your insecure debt. If you are able to pay the debt, well and good, if not, the lenders have a right to take away your home. Its a worst case scenario for any debtor.

Talk to creditors

In his book Allen mentions another important and one of the most common way that most people tend to avoid doing, is to talk to creditors. The reason may mainly be creditor’s attitude towards people, but then it is worth a shot to actually sit over and reason out with creditors, why the payment cannot be done at the immediate time. Any tragic family incident may be a trigger for debts, and thus it should be clearly mentioned to the creditors.

Request them for a lower interest rate, lower charges, or any other such benefit that would enable you to repay the debt efficiently. If a creditor tends to harass you, then you have a right to file a complain against them, as mentioned in the The Fair Debt Collection Practices Act.

creditors harassing

Bankruptcy

The last resort to solve the matter is to declare bankruptcy. This is a legal way of the debtor declaring his inability to solve the debt and requires a reorganization. According to Allen, if nothing works, this may be a fresh way to start the necessary changes. A legal advisor dealing in similar cases, may be able to assist you through the process.

Bankruptcy

Positive attitude

The magic attitude that is supposed to work for all problems! Yes! no matter what you have to face in life, positivity and pro-activeness is a very much needed approach. Fretting, complaining, crying, screaming cannot help, rather a cool mind, a positive energy to deal with problems is what that is most needed. Financial problems can recover if the appropriate steps are taken under a cool mind.