If you find yourself in a swamp of debt and you cannot crawl your way out, it is time to stop and stand back from the situation for a while. People tend to rob Peter to pay Paul, which makes their financial situation even worse; it is a temporary solution at best.
Put down your calculator and make a cup of tea or pour a glass of wine. Things are about to change for the better. Now that you found this article, you are going to learn how to handle the situation. Here is how to deal with debts, and mistakes to avoid along the way.
You must assess your financial state. Add up every penny that comes into your house. That is the golden number with which you must work.
Make a list of your creditors and put them in order of importance. Here is the list as I see it.
3. Secured Loans
4. Utility Companies
5. Unsecured Loans
6. Credit Cards
7. Store Cards
You may have others, of course, but the above creditors are common.
I advise you to consult with the tax agency first. IRS wage garnishments are a useful way for them to collect what they owe. When you pick up your wages, you know that is one debt about which you don’t have to worry. Try to negotiate with them to get the best deal you can, but you are at their mercy at the end of the day.
You must calculate how much money you need to live on and deduct that from your wages, after the IRS has taken their cut. You should then share the rest between your creditors, but not equally. You will find that the creditors of least importance are the ones that will chase payments more aggressively than the others.
Contact your mortgage provider first and arrange to pay extra on top of your usual payments, to clear the arrears.
Contact the providers of secured loans and the utility companies to make the same arrangements.
If there is any money left over, share it between the remaining companies. They won’t like it, but if you prove that you cannot afford more, they will accept your terms. Only if there is significant equity in your home are they likely to bankrupt you because it costs them a lot of money to do so.
Mistakes To Avoid
There are some things you must be aware of when dealing with debt and creditors.
• Always contact them in writing. Many of the creditors will mislead you on the telephone, where the recordings of the conversation go missing.
• Never speak to them on the phone when they call you. Insist they write to you and change your number. You might need their letters as evidence in the future.
• Never give them your bank details so that they can take a small payment; they might empty your account.
• Never give them your bank card number for the same reason.
Most people get out of debt eventually; it usually takes about five or six years. If you can’t clear it by then, I advise you to look at options such as bankruptcy. Look to the future; your problems will be over eventually, and you can get on with the rest of your life.