Problem debt is rampant throughout America. In addition to mortgages
and auto loans, the average household in the U.S. has nearly $10,000 in
credit card debt. As the major credit card companies have recently
doubled their minimum payment requirements, now is a worthy time to
outline the various options available to most consumers who have more
debt than they can handle.
Stop spending money on
nonessential items. "Nonessential" is difficult to define, but it more
or less means anything that isn't absolutely necessary to live. Phone
bills, mortgages, and groceries are essential. Lattes at Starbucks,
satellite television, and meals from fast food restaurants are not. By
cutting out all extra spending, you can probably save several hundred
dollars per month. That money can be used to reduce debt.Consolidate
your debt. If you have more than one credit card and your accounts
aren't all at their limit, you can transfer balances from
higher-interest accounts to those with lower interest accounts.
Alternatively, if you own a home, you probably have accumulated some
equity. You can obtain a home equity loan or line of credit and
transfer some of your debt to that loan. As a bonus, the interest on
home equity loans is tax deductible. Be careful, though. If you
transfer your debt to a home equity loan, you can lose your home if you
do not repay it.Find a reputable credit
counselor. This will soon be a prerequisite to filing for bankruptcy,
thanks to a recently passed Federal law. Counseling agencies can
negotiate with your creditors to assist you establish a repayment plan
that you can afford. They may be able to have interest rates reduced or
have late fees waived. Most agencies charge for their services, but the
reputable ones limite their fees to what you can afford to pay.File
for bankruptcy. This is not a decision to be taken lightly, as a
bankruptcy filing will remain on your credit record for ten years. By
filing for bankruptcy, you declare to the courts that you cannot repay
your debts. Most consumers are currently allowed to file under Chapter
7 of the Federal code, which allows the courts to wipe out most debts.
This will change this fall, as recently passed Federal legislation
takes place. The new regulations will likely require a repayment
schedule, and attorney, and higher filing fees. Bankruptcy can assist you
get a fresh start, but it's not a magic solution. It will be quite
difficult to reestablish credit after a bankruptcy filing Having
more debt than you can handle is a serious problem, but like most
problems, it is one that has available solutions. The first step is to
act promptly, as unattended debts only grow larger. With time, patience
and diligence, most consumers can overcome the burden of excessive debt.
