Whether you are facing a financial crisis because of an overspending lifestyle, losing your job, a serious illness of a family member or of yourself it is crucial to start
managing personal debt
right now so that you will not face the worst situation of filing for bankruptcy in future.
Depending on your level of commitment, your current and future income level and your current debt situation the solution that suits you to best manage your debt will be unique to you. While there are many options available, you should first have a good look at your current standing in terms of income and expenses before making any decision.
Talk to your creditors right now
If you think you will have problems making payments to your creditors, contact them right away. Explain to them your reasons for the inability to pay and discuss with them whether it is possible to change the existing payment pattern to a more convenient one. If you wait too long to inform the creditors, they will not be willing to come to a compromise.
Take care of your secured debt first
Debt which is taken out on an asset such as a house or a car should be paid on time, as you risk losing the asset if payment is delayed. If you feel you will be unable to make the loan payments for a long time, consider selling the asset before it is repossessed by the creditor.
If your level of debt is not overwhelming then you might be able to manage it by yourself without the help of a financial organization. First conduct a sensible evaluation of the amount of money that comes to you and how much you give out or spend. Make a list of all your income sources. Then write down those expenses where you pay the same amount each month, such as house rent or mortgage. Next state the expenses that change each month such as food, entertainment and leisure activities. Make sure you write down all expenses, even the trivial ones. Once all expenses are noted, it will help you to visualize exactly how you spend money and spot which are the essentials and then prioritize the others. Remember that you must be able to meet the expenses of the basic needs which are food, shelter, health, education and if applicable insurance.
Drawing up a budget plan and following it might be too much for you to handle. Or you couldn’t come to an agreement with the creditors to change the payment plan. If this is the case you might benefit from the services offered by credit counseling
organizations. They will go through the current position of your finances with you and offer advice on how to better manage your funds and your debt and educate you on drawing up a budget. In addition they will even offer you reading material if needed on those areas.
Debt Management Plans
The credit counseling firm can also offer you a debt management plan. Here as above they will assess your financial situation and come up with a statement and then decide how much you can really afford to pay to each creditor. The firm will meet up with your creditors and discuss the possibility of getting reductions in payments. Once they have come to an agreement, you will pay the firm a certain amount each month and they will spread it to your creditors according to the previously agreed amounts. It is important to note that once you enroll in such a plan the company will require you to stop accumulating additional debt until you have paid up your existing debts in full.
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