Exploring Your Options to Get Out of Debt

When it comes to getting out of debt it can oftentimes seem like a insurmountable task. Depending on the cards life has dealt you, the extent of your debt will vary. Regardless of the amount of debt you may have incurred whether personal or business below is a list of options you might consider to get out of debt.

Credit Card Debt Consolidation

What is it? Credit card debt consolidation is the process of taking all of the debt you’ve accumulated on multiple credit cards consolidating it into one debt consolidation loan that you pay monthly.  It was created as an aid to help people with multiple credit cards pay off their debts rather than default on them.

It is extremely helpful to people that struggle with various interest rates. All credit card debt is added together into one bill that is given a particular interest rate. In some cases, that interest rate will be lower than that of many of the cards taken into consideration. Debtors then have a more manageable sum of money to pay back.

It is also wonderful for those that truly struggle to remember all of the deadlines associated with their credit cards. Consolidation into one monthly bill will help ensure that the credit card companies get paid. They fear one thing and one thing only: not getting the promised money back in a timely manner. Credit card debt consolidation helps that process go through more reliably.

Other Benefits

The added benefits include a sense of relief for finding a light at the end of this very long tunnel. Managing multiple accounts is extremely stressful. They take a lot of energy and worry. Bringing them together into one relieves much of that burden. The payments are more manageable in the mind this way.

The creditors and collection agencies also lay off the pressure. Your phone lines are clear and threats are diminished.

Everything happens behind closed doors. Your debt consolidation services work under discretion. They talk directly to your creditors and in essence, explain the situation. They petition for reduced interest rates and help meeting the debtor in the middle to ensure they get paid.

The main danger with credit card debt consolidation is finding someone honest to do it for you. Unfortunately, just as in every business where money is involved, there are the sharks that will ruin it for the rest of us. They will try to scam you. Their tricks will leave you in a worse position than when you began.

There are a few things you can do to make sure you are properly informed and prepared to go through this process.

First, call your creditors yourself (since this is what debt consolidation companies would do for you anyways). Explain your situation and express your desire to pay them back. Many times, they will be willing to work with you to negotiate a new payback plan. This can include lowering your payments, interest rate, late fees, etc. They will often take a lower payment to bankruptcy any day, as you may actually pay your debt back when they meet you in the middle.

Second, seek out the help of a professional. This can mean you go to a reputable debt consolidation company. It can also mean you visit a credit counselor, or a bankruptcy lawyer. Any of these options can help guide you to a payment plan that actually works for you.

Third, do some research on the companies and professionals you talk to. One of the best reporting sites on the web right now is the Better Business Bureau. If people are having trouble with a business, it’s reported to the Better Business Bureau. More and more rating sites are showing up on the web. Yelp and Google are just a few examples of places looking to give you honest ratings. See what you can find to validate that these guys know what they’re talking about on the web.

Credit Card Debt Consolidation might not be the best thing for you either though. If you would rather just grit your teeth and punch your way through this thing, there are a couple of other options to consider.

Work another job

If you can, add another job to your list. Working two jobs can be an uncomfortable experience, but it can sometimes give you just the money you’re looking for. You’re not the only one that could take the extra job though. A wife or older child could help out as well, if you asked.

Find an investor (if you’re starting a business)

Find someone who believes in your work enough to invest in your company. Investors can help you out of tight spots occasionally.

Bankruptcy

What is bankruptcy? Bankruptcy is a way to stave off the creditors when things get really bad. When you file for bankruptcy, you are alerting the public that you are unable to pay off your debts. There are a number of different “chapters” under which you can file for bankruptcy. Each means something different to the law (and your creditors) and each absolves you of certain responsibilities (if your filing is approved). The following are the 3 most common.

Chapter 7

Chapter 7 is the most popular type of bankruptcy. Under Chapter 7, you liquidate all valuable property to pay off a debt. You essentially sell everything worth something; put the proceeds in the debtor’s hands, and whatever’s left of the debt is no longer your problem. This type is extremely difficult to qualify for and various parts of the law vary from state to state. The main effect is that you get to start over with a fresh slate as a Chapter 7 will clean up the loose ends.

Chapter 13

Chapter 13 is essentially a re-evaluation of the current payback plans. Whatever the reason you cannot pay back your debt according to the current payback plan. As you can imagine, most collectors aren’t very lenient on this matter. You want to pay it off, but can’t seem to find a way. That’s what Chapter 13 bankruptcy is for. Debtors come to the court system waving a white flag and asking for a more lenient pay back schedule.

To qualify, you must have less than a million dollars in secured debts and less than $360,000 in unsecured debts. The exact numbers adjust according to the current consumer price index, so be sure to check what the true limit is before you try filing. Any more than these amounts will disqualify you on the spot.

They come forward with more than just a white flag though. The law requires you give a full disclosure of your assets, income, debts, and other financial information pertinent to your current situation. You must also have a steady source of income and present a proposal of a payment plan you can afford to pay off over the next 3-5 years. The benefits are amazing. You get to keep your current assets and get a more manageable plan to work with, a plan that your creditors can’t demand more from over the course of the bankruptcy.

When you receive the green flag to go through with the new payment plan, you must keep to it.

Chapter 11

Chapter 11 bankruptcy is most popular with people in the business sector. It is the next resort for people that have secured, or unsecured debts that exceed the limitations of Chapter 13. Very few individuals have opportunities to be in that much debt (hence the reason businesses tend to take advantage of it more often).

Chapter 11 offers companies some time to continue operations as normal until their case is completely reviewed, even though they are in considerable debt. In filing for chapter 11, the debtor agrees to only purchase things needed for day-to-day operation; not sell any major piece of equipment, a part of the company; and not expand in any way. This can sometimes lead to closing locations, laying off employees or renegotiating existing contracts with unions.

If it doesn’t look like the company is going to operate profitably while making payments, their filing may be converted into a chapter 7 case.

What are the consequences of filing for bankruptcy? Filing for bankruptcy is detrimental to your credit. It is the ultimate breach of trust in a person. Consequently, it may be almost impossible to get good credit again for years to come, chapter 7 cases taking longer than 13. Your credit history sticks with you for a very long time too. Bankruptcy may be a good way out of your current predicament, but it sticks to you like a black eye for years to come.

You also become ineligible to apply for bankruptcy again for a further 8 years, meaning that you need to get responsible with your credit again if you want to make it through the coming decade.

Filing for bankruptcy can also hurt your future career opportunities. If you drove your personal finances into the ground, what are the odds that you’re going to do well by the company, especially if you were a director or spender of money? Your career can plateau pretty quickly when you can’t be trusted with the expenses of the company.

Going for bankruptcy isn’t always your best option when it comes to getting out of debt. It is a great way to legally extend your time to pay back your debts, but you will be hurting over it for a long time to come.

There is a way out of nearly every situation. Regardless of which option you choose to get out of debt Check City is here to help you out. Whether it’s a cash advance to by you a little time until you decide which option is best for you, or a deb consolidation loan to get all of your payments into one convenient payment we can help. Take your time deciding which route is best for you, it’s important to know your options and choose one that will work for you.

 

Comments are closed.