Many people experience financial struggles at some point in their lives, whether due to illness, the loss of a job, or simply over-extending themselves. It can be overwhelming and difficult to know where to focus your efforts. The following tips may be useful if you or someone you know ever struggle to make ends meet.
Develop a Budget
The first step should be to make a budget of all your income and expenses. Try to account for every last bit of money you spend every month, as seemingly insignificant daily expenses, such as a daily cup of coffee or eating out at lunch, can add up to real money over time and impact your ability to meet your basic obligations. If you are still struggling to make ends meet after budgeting and cutting all non-essential expenses, you may want to consider some of the following options.
Contact Your Creditors Directly
It may be beneficial to contact your creditors directly, explain to them why you are having difficulty, and try to work out a modified payment plan. The sooner you do this, the better. If you fall too far behind on payments, your creditors may turn over your account to a collection agency and if could be more difficult to work out alternative arrangements.
Sell Assets
If you are struggling to make payments on your secured credit, such as home or auto loans, you may consider selling the items to satisfy the debt. Even if you owe more than your house or vehicle is worth, you should still discuss your options with your lender, as your lender may be willing to accept less than the full balance under a “short sale” or work out a reduced payment plan for any shortfall. While a short sale will still likely impact your credit, it is often much less damaging than a foreclosure or repossession.
Work with Credit Counselors
Reputable credit counseling organizations are typically non-profit and offer services such as educational materials, seminars, personalized counseling and planning, and debt management plans. You may just need some simple guidance and counseling, or you may benefit from a full debt management plan, in which your credit counseling organization collects a monthly sum from you and distributes it to your creditors, possibly under more favorable negotiated terms. However, you should make sure you fully understand any plan before enrolling, including the cost, the timing of the payments to your creditors, and whether your creditors have agreed to the terms. Any agreements should be in writing.
Debt Settlement Programs
Debt settlement programs typically consist of a for-profit company negotiating on your behalf to settle your debt for a reduced lump sum payment. These programs are very risky and often harm your credit because they often require you to stop paying your creditors while you save up enough for a lump sum payment. Meanwhile, payments will still be reported as delinquent and your creditor may not ultimately accept a settlement anyway. You should be very cautious when considering a debt settlement program administered by a third party.
Bankruptcy
If you still aren’t able to manage your debt load after trying all other avenues, you may wish to consult with an attorney about filing for bankruptcy. The bankruptcy process can be expensive and will substantially harm your credit for an extended period of time, so it should only be considered as a last resort. However, in some circumstances, it can be a way to move forward with a reduced debt load while also potentially keeping some of your assets such as a house and vehicle.
Watch out for Scams
Unfortunately, there are many scams that take advantage of people in vulnerable situations. With any of these options, you should do your homework to ensure you are dealing with a reputable company or person before you pay any money or divulge any confidential information. Most reputable credit counseling companies will be non-profit, although just because a company is non-profit doesn’t necessarily mean it is working in your best interest.
The U.S. Department of Justice maintains a list of credit counseling organizations that are approved by the U.S. trustee and bankruptcy administrator, which may be a good place to start. You may also wish to check with the Better Business Bureau or the Arizona Attorney General’s office for any history of complaints or legal action. The Federal Trade Commission and Consumer Financial Protection Bureau also maintain some useful information on their websites. QCBN
Country Bank is a full service community bank serving Yavapai County with offices in Prescott, Prescott Valley, and Cottonwood. Ryan Glennan, NMLS # 478327, is a vice president of Country Bank specializing in commercial lending and residential construction loans. Please visit www.countrybankaz.com or call 928-443-9595 for more information.
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