The Consequences of Too Much Debt

When an individual or family has accrued too much debt, bills are not paid on time, creditors are calling, finding money for even the essentials is difficult, and the stress and anxiety produce both emotional and physical illness. In many instances, the debt has resulted from irresponsible spending, and everyone engages in this behavior at some time. Other times, the debt is the result of negative circumstances, such as the loss of employment, a lengthy illness, or huge medical bills. Whatever the cause, it is time to become proactive. You must gain access to expert counsel to obtain the immediate debt relief you need. The following steps will help you locate assistance.

Where to Begin

The first step in your journey should be to contact your local consumer credit counseling agency. This is a nonprofit organization, funded by the government, and the services are free. Among the types of help you will receive are the following:

1. Thorough analysis of your financial situation to determine the level of debt and the difficulty you are having in meeting your obligations.
2. An honest list of options for getting the relief you need, with the pros and cons of each option.
3. Education and training in the development of a budget and in the basics of personal finance so that you are able to avoid recurrence of this situation.
4. Negotiation with your creditors for some relief in payment, interest rate, or overall total debt amount, as well as the potential restructuring of your loan payments so that you can actually afford them.
5. Financial management services if you believe that you do not have the self-discipline or knowledge to manage your own. Briefly, you can turn your entire net income over to your counselor who will pay your bills and provide you with an allowance, until the debt is eliminated and you feel confident in your own ability to manage your finances properly.
6. Solid follow-up contact and advice for the future

Debt Consolidation

If you decide that you best option is to obtain a debt consolidation loan, that is, one large loan that will pay off all of the other debt, leaving you with a smaller monthly payment, there are a number of services which offer securing such a loan for you. As well, these professionals will negotiate with your creditors for lower total debt amounts. Their services are not free, and the fees are usually rolled into the consolidation loan. Understand that consolidation loans do not come cheap, and the interest rate will be high. But, with good self-discipline and commitment you can meet your monthly obligation, adding to your payment whenever you can, in order to reduce the debt further.

Bankruptcy

If you truly believe that a bankruptcy is the only option, you will need to consult an attorney who can advise you on the type which best meets your needs. Again, there will be fees, and usually they must be paid up-front. Once the bankruptcy is filed, your credit rating will plunge, and you need to be prepared for that. Building credit back up after a bankruptcy takes time and effort, and you should get expert advice from a financial counselor regarding the most efficient manner in which to do this.