Many people face financial challenges at some time in their lives. Personal or family illness, loss of a job or simple overspending and lead to trouble. It may seem overwhelming but it can be overcome. If you or someone you know is having financial hardships consider these options: set realistic budgets, credit counseling from a reputable organization, debt consolidation or as a last resort bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.
Develop a Budget
The first step toward taking control of your financial situation is to get real about how much money you take in and how much you spend. List your income from all sources. Then list your “fixed” expenses that are the same each month like rent, mortgage, car payments and insurance. Next list the expenses that vary like entertainment, recreation, and clothing. Writing down all your expenses. Even the small ones like lunch or tolls. The goal is to make sure you can make ends meet on the basics: housing, food, electricity.
Developing a budget and sticking when buying a vehicle to it is one of the steps we also recommend in our “Used Car Buyers Tips”
Contact your creditors immediately if you have trouble paying them. Explain what is happening and try to work out a modified payment plan. Don’t wait until things get turned over to a debt collector.
Federal law (Fair Debt Collection Practices Act) dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
Your debts can be secured or unsecured. Secured debts usually are tied to an asset like your car for a car loan. If you stop making payments, lenders can repossess your car. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.
Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report. Auto refinancing is another option that may help improve your situation.
You may be able to lower your cost of credit by consolidating your debt or refinancing your car. The cost of debt consolidation loans can add up. In addition to interest on the loans you may have to pay “points,” with one point equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages that are not available with other kinds of credit. So proceed with caution.
If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization.
Personal bankruptcy should always be your last resort. A bankruptcy stays on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, it is a legal procedure that offers a fresh start for people who can’t satisfy their debts. People who follow the bankruptcy rules receive a discharge a court order that says they don’t have to repay certain debts.
The consequences of bankruptcy are significant and require careful consideration. Major changes to the bankruptcy laws involves certain hurdles that you must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. The U.S. Trustee Program is an organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at <a href=”http://www.justice.gov/ust/” target=”_blank”>usdoj.gov/ust</a>
We hope this information helps you to better deal with debt and Thank you for visiting.