The first thing to remember in life is that you will know when the actual end of the world comes. There will be trumpets, angels, demons and a whole bunch of disarray, or so we’re told.
The second thing to remember is that financial problems, as bleak as they may seem, are not the end of the world.
The third thing to remember is that while all problems have a solution, the solution might not always be easy.
Most people have some sort of debt, whether it’s just rent or car payments, utilities, etc. Many people also have credit card debt, to the tune of 1.4 trillion dollars throughout the country. That averages out to about $10,000 per American household. If you are now in this credit crunch, consider the fact that it might have taken you years to accumulate this debt. What adds to the debt are increased interest rates, late and over-the-limit fees, annual fees and more. So, if you are making minimum payments on those cards, the average pay-off time is about 30 years and that is if you never miss a payment or go over your credit limit.
Credit card debt is like a bad relationship you can’t seem to get out of. You do everything you can and yet it always is there in front of you, to the point that your frustration, anger and fear get the better of you and you basically become paralyzed to do anything.
Are you there yet??
If so, understand that you do have options. Let’s go bottom to top:
- Do nothing. This is the best way to wreck your credit beyond repair. What it means is that you are doing nothing to pay your debt, you haven’t contacted your creditors or answered their mail or calls. Here’s what can happen with this option: The creditors can call you every day (although only once), they can take you to court and either get a judgment against you or file liens against any property you might own. Whether or not you compensate the creditor(s) the judgments will stay attached to your credit report for at least seven years (and sometimes longer) If you sell your home, you will have to satisfy the lien before you can see any of the money from the sale. This is NOT a good option any way you look at it.
- Debt Settlement: Many consumers get hooked into debt settlements because of flashy advertising and offers that sound too good to be true. Guess what? They usually are. By definition, a debt settlement is a situation in which part of your debt is erased. (for example if your debt is $10,000 and the settlement is 50%, you only owe $5000) This might sound good in theory, however, it almost NEVER works out that way. Most creditors do not settle for that much. Many settlement companies are unethical and will take payments from you and may not do anything with your money or your creditors for months, if ever. Always be wary of companies that are vague about what they do or won’t put an offer in writing for you. You need to question them regarding the length of time it will take to get the debt paid and what will happen to your credit. Further downside: The notation on your credit report will read “paid as settled” instead of “paid in full” What this means to future creditors is that you were unable to handle your full bill(s) and they might hesitate in offering credit to you. You also will receive a 1099 tax form for any money that you saved and you will be liable for the taxes. You may have to pay a fee for a percentage of what you saved and that sometimes is considerable and comes as a not so pleasant surprise. Just remember the one main thing regarding debt settlements and the companies that offer them: They almost never are what they appear to be.
- You can deal with your creditors on your own: You may say,”hey why not?” Here’s the deal on that: Just like settlement companies, credit card companies always seem willing to make that deal to get you paid up…they claim to offer lower interest rates, lower payments, eliminate penalty fees, etc. BE VERY CAREFUL!!!! Always speak to a supervisor or manager who is actually authorized to approve deals with you. Get their name in case any questions ensue after the fact. Make sure you get the offer in writing…no written offer/no deal! Beware of short term fixes. They generally only work in the short term, if at all. Remember, all credit card companies are in it to make (and take) money. They are not in it to assist you by losing money. Here’s another thing. Since the credit card was invented in 1946, no credit card company has ever advertised by saying, “Why don’t you pass on this card, you don’t really need it?” One last thing. Credit card companies usually don’t send you birthday cards. So what? Usually only people that love you or at least like you, send you a card. What does that say about large corporations such as credit card companies? There you have it!
- Bankruptcy. Believe it or not, it is not the worst thing in the world. It is the government’s way of saying, “Hey, we know you might not have managed your money all that well, or you messed up in some other way. So, we forgive you. Sometimes (with a Chapter 7) they forgive all your debt. Sometime (Chapter 13) only a portion of it. But a bankruptcy attorney will give you what is called a “means test” to determine what means you have to pay your debts. There will be some counseling you’ll have to take with a Certified Personal Finance Counselor and then you’ll go to court for about 10 minutes. You’ll get asked a few questions, you will take a second counseling session after your court date and voila!.. you are done with it. Donald Trump, President Ulysses Grant, “Wizard of Oz” author Frank Baum, Circus magnate, P.T. Barnum and many others, including this author have filed for bankruptcy. So what? It can happen to anyone, at any level financially. Stop worrying about it. If you qualify..JUST DO IT!
- Utilize a legitimate Debt Management Company: There are some good ones out there. Here’s the key. Check them out! You can get a profile from the Better Business Bureau where they operate. Yes, there are stories that companies can buy ratings. Whether it’s true or not, the BBB does record things such as; a) what is the history of complaints against the company and how or did they resolve problems, b) what do people think of the company (testimonials) and are they licensed to do business in their state (and other states). You can also check with the state attorney general where they do business. Are they a non-profit organization? Are their fees reasonable and or limited? Do they put everything in writing? Find all this out before you call them. Once you do call, you will find out that they have binding agreements with most of the banks and credit card companies out there. You will find out that their fees are low and monthly payments are generally as reasonable as possible, while they are truly out to assist you. You will find that most legit debt management companies also have many financial literacy educational programs, offered individually and in their communities. If you want to pay your debt with the best chance of regaining good credit , go the DMP route.
Now listen! Whatever path you choose, there is probably going to be some apprehension, nerves, second thoughts, etc. That’s perfectly normal! So, just STOP! Take time to understand what you are doing is the right thing for you. The right thing isn’t always smooth, but it is the right thing. BREATHE! If you aren’t breathing, you’re in deep trouble. And remember, debt is no reason to stop breathing! LIVE! You have the entire rest of your life to not only make things right, but to do it all better. Take it from one who has been there, YOU CAN GET THROUGH THIS! If you have any doubts, contact me and I’ll tell you how!
