Tuesday, August 15, 2017

When Creditors Come Knocking, You Need To Have An Answer

knock for money
We should all be careful about the credit agreements we sign up for and how well we manage debt as to avoid trouble. However, sometimes, we aren’t as forward thinking as we should be. Sometimes, our plans are rendered entirely useless when life throws a curveball that disrupts our finances. In either of those situations, if you fail to keep control of your debt, your creditors are going to start coming. You need to have a response for them.

Don’t hide away

If you’re starting to get letters from your creditor or even threats, then silence is rarely if ever the best course of action. Creditors don’t want to have to chase you just as much as you don’t want to be chased. Often, calling them and letting them know your situation can help. It won’t get you out of the debt, but negotiating with creditors can help you find an agreement that works for both you. The remaining balance might be chopped into smaller installments, the deadline might be extended, interest might be frozen. Many creditors are much more reasonable than you might expect. They want to get their money back and that often means they’re willing to find a compromise. On the other hand, ignore them and they’re more likely to pass off the handling of the debt to a collections agency, which is when you’re beyond all chance of reasoning with them.

Let someone else take care of it

Consolidation is often a very reasonable option, too. It allows you to shift debt to another creditor with different terms. But it has to be used right. You can’t consolidate debt in a way that is only kicking the can further down the road, in a manner of speaking. When consolidating, make sure you’re not lifting an interest cap and costing yourself more in the long run, for instance. Read the terms of the consolidation agreement carefully and make sure they can fit a payment plan that you can stick to.

Wiping the slate

If paying the debt is well and truly beyond your ability, then you might have to think of greater measures. While filing for chapter 7 bankruptcy is never something to be done lightly, it is not the end of the world as some imagine it to be. It is a fairly commonly used tool for when debt grows too large to deal with. In exchange for clearing all debts (except student debt), your valuable assets are seized and used to pay off your creditors as best as they can. Your credit score will also take a considerable hit, but it will recover over time.

The last ditch

Sometimes, you can’t qualify for bankruptcy, however. Even then, you still have options. Namely, through debt settlement. Settlement is highly risky, and all experts agree that bankruptcy is considerably more favorable when it’s available. Settlement involves working with a company to get the bank to agree to accept less than what you owe when you’re falling behind payments. It’s a situation that involves a lot negotiation and waiting while you keep receiving late charges, collections notices and legal threats. It’s not guaranteed to work, either, so it should only ever be considered as an absolute last resort.

There are always options for dealing with debt. Some of them are more painful than others, but any plan of action is much better than waiting and dealing with the stress and anxiety that not addressing the problem can bring.

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