Let’s say you have $50,000 in credit card debt and your situation has gotten to the point where you can’t keep up with your payments. Something has to be done in order for you to take care of your family, get your life back in control and so on.
Many people land in this situation and jump into the first debt solution that crosses their path. I urge you not to do this! Desperate situations such as $50,000 in credit card debt often cause us to act irrationally. I recommend taking a deep breath and sitting down to do some research to determine which debt solution is right for you. Trying to get out of debt fast may cause you to overlook essential elements or disregard solutions more appropriate for your financial situation.
Watch my video to learn about the four ways to get out of debt and then stop in to visit us for a free, no-obligation consultation for a review of your financial situation and assessment of the options available to you.
1 – Do Nothing
As I pointed out in the video, you won’t go to jail for falling into debt and ignoring the situation. However, what will happen isn’t going to improve your stress level or difficult situation. Your creditors will get a judgment against you and begin to garnish your wages and freeze your bank account. This will cause your bad financial situation to snowball until your creditors get the money they are due, you run out of money or file bankruptcy.
2 – Debt Consolidation
Choosing debt consolidation as a debt relief solution advertises to the world that you are in financial distress. Plus, any debts that are forgiven are taxable.
Your consolidation company will work to consolidate your debt into one payment, which you will make to them. Debt consolidation companies exist to make money, like any other business. These programs have fees that allow them to make money and end up adding costs to your already difficult financial situation. Additionally, your contact at this company is often out of state, making communication difficult and impersonal.
Debt consolidation may ease your stress short term, but you will still be responsible for completely paying off your debt which most likely increased due to fees and lengthened repayment plans.
If you can leave behind the stigma associated with bankruptcy, you may find one of the next two options may be right for you.
3 – Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also called the “wage-earners” bankruptcy, is a debt consolidation plan that you can afford. It allows you to prioritize your debt and make payments based on your income. You will be bound to a repayment plan that spans 3-5 years with bi-weekly or monthly installments that are calculated based on your income. You will make payments to a trustee who will turn around and pay your creditors.
The amount you pay after 3 or 5 years may or may not equal your total debt. If you follow-through with your plan, any unpaid debt is eliminated tax-free.
4 – Chapter 7 Bankruptcy
This option will completely eliminate debt (tax free) and consists of selling some of your property in order to pay your creditors. For those I have helped through a Chapter 7, most have been able to keep their homes, furnishings, pensions and other assets. Chapter 7 provides a clean slate, allowing you to start fresh.
Filing for bankruptcy can ease your pain, eliminate your debt tax-free, help you sleep better at night and more. If you are experiencing a difficult financial situation and are having trouble seeing light at the end of the tunnel, consider bankruptcy as a viable debt relief option. Consult our bankruptcy attorneys for no-obligation legal advice that suits your financial troubles.