Many factors indicate that the economic situation won’t get much better – the rate of inflation is heading north, the greenback is weakening, the mountain of debts is rising even higher… but none of your debts will just disappear on its own, however much you wish and whine. You have to stand strong and work hard to get yourself out of the situation! First of all, remember to live frugal and try to save on your everyday purchases – you can always pay less for your shopping when you use an Overstock coupon code or look for other special offers. Besides that basic step, check out our five ways of helping yourself escape the debt trap below:
1. Be Bold Enough to Face Up Your Financial Situation
Rather than wishing that your debts were not there, take the first step to detail down every single one of them, the creditors you owe to and when they are due for payment. Write them down in order of importance, drawing out a payment plan for each one. Start with top-priority debts like mortgage/rent, federal taxes and gas/electricity bills, then move to lower priority ones like credit card debts/overdrafts and hire purchase agreements, to least priority debts like relative loans.
2. Draw out Your Budget & Contact Creditors
Work out a budget detailing all your incomes and non-debt expenditures so that you are sure of how much you have remaining to pay your debts. In case you are not in a position to meet your debt payment obligations as set out in agreements with your creditors, make sure they are aware of this early enough to make plans for an alternative payment formula. For instance, your lender will probably accept a reduced amount if you will be committed to honoring your regular payments, accept lower monthly payments for some time, or even allow for an extension of your loan’s term.
In case you need to draft a formal Debt Management Plan, you can contact a non-charging professional group like the Consumer CreditCounselling Service (CCCS) for help.
3. For Rent Arrears, Speak to Your Landlord
In case you find yourself in a situation where you cannot pay your rent on time, make it known to your landlord. Depending on a number of factors, including your tenancy agreement, your landlord may allow you to make a local arrangement on how you can pay off your rent arrears. You may also want to check if you qualify for any state or federal help with paying your rent arrears and other housing benefits.
4. Seek out for a Full, Final Settlement
Sometimes a relative or a friend may be willing to help you settle some of your debts. If this involves giving a lump sum, see if your lenders and creditors can accept the payment as a full and final settlement, even when the amount is lower than what you owe them. Remember to explain to your debtors that the relative/friend payment is one-off so that you can make further plans for the payment of the remaining part of the debt.
5. Filing for Bankruptcy
This should come as the very last resort. Even if bankruptcy appears like the only option you have, remember to be sure of everything involved in the filing, more so the repercussions. Although filing for bankruptcy can help you escape all your remaining debts and begin afresh, some of its severe consequences include the end of your career in case you work in the legal field, or if you are a stockbroker or an estate agent.
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