Deciding Your Best Options For Paying Down Debt
I want to talk about a process of elimination that is kind of like a checklist of what you can go through to help you, in the privacy of your own home, determine what is your best option to get relief from debt.
In other words, debt pay down help and then a little checklist of things to do to discover how you’re gonna deal with it.
The first thing that conventional wisdom tells you to do, and it’s absolutely wrong, which is important to point out immediately, avoid bankruptcy at all costs.
All of the talk show hosts and the different media personalities and a lot of websites, tons, will talk about how important it is for you to skip that option and avoid it and gut it out, grit it out, at all costs.
It’s so important for your credit, most of that’s garbage. It’s the place you want to start.
Bankruptcy is the first thing you want to either know that you can qualify for, at least chapter seven, where you discharge your unsecured debts that you’re probably struggling with.
Or that it’s something that you cannot do, and you can cross it off. Because you either make too much money for your means at testing in your state or would be forced to sell some things that you otherwise want to hold onto.
Or could sell privately and use those funds to pay off debt and avoid bankruptcy, where the bankruptcy trustee would just force you to sell it.
So that process of elimination is something that you either want to have in your back pocket as you go about your decision-making process, knowing that it’s available to you or that you can simply cross off.
So, the first step is consulting with a bankruptcy attorney. You can do that from the privacy of your own home right on the telephone or schedule an appointment with somebody local, a local consumer attorney that has office visits.
Second is, do you have the budget ability? Is your income stable, predictable? Can you make cutbacks in areas of your finances that would allow you to do an aggressive debt snowball or roll up, where you’re paying down higher interest cards or lower balance cards more aggressively, more than the minimums? And then once you finish with that account, you take those proceeds and apply those to the next account in line, the next account.
You get that snowball effect, and you can pay down unsecured debts rapidly. Sometimes you can even supplement that by selling something that you don’t use. If you have that mountain bike in your garage, it’s something you take out twice in the summer, yeah, maybe you can get rid of that.
And use that extra money to pay down either the highest interest, again, or the lowest balance and start having some success right away. If you can’t do that, you measure your interest rates on your credit cards.
And if you’re paying any of them over 12%, connect with a certified credit counselor to determine what you can consolidate, all of your debts that qualify, mainly credit cards, gas cards, store cards, some medical bills. Get a quote, down to the penny quote, of what your debt can be consolidated down to.
So for example, what if you’re paying $800 a month in all of your minimum payments right now, and your interest rates average 19%? What if you could get that monthly payment reduced to 600 and have that be fixed over the course of the repayment plan on all of those cards that are enrolled? That could give you the breathing room that you need to one, continue to afford to pay anything at all and two, to be successful and get out of debt.
Finally, you need to think about what it would take to maybe resolve debt through negotiating with your creditors a lower lump sum payoff amount. Sometimes you can get terms.
But generally speaking, let’s assume you take your full balances across all of your unsecured debts that you can do debt settlement with and cut them in half. So, what’s that number? Let’s say you owe $18,000in credit card debt, and you were able to get it all gone for 9,000.
How long does it take you to come up with that 9,000? And your answer to that question, and of course you’re not able to pay your credit cards, so you may already be late with them.
Or if you’re not late, you need to weigh what the impact of your not paying will have on your credit score and your credit reports and your goals over the course of the next one, two, three years. If you had any financing goals, like buying home and things like that because it will have a major impact.
But is that financially viable for you in a window of time? Raising that $9,000 quick enough to get those accounts settled and get you out of harm’s way from debt collectors and some of the more aggressive collection tactics that are used to get you to pay.
So this is what you have to analyze and decide. Particularly how you’re going to get from where you’re at today, struggling and wondering how you’re gonna survive and make ends meet while paying all of your bills.
Or you’ve been unable to, and now what? And finish all of your research inside of a day and understand from a very numbers based perspective what you can afford to do because really this all comes down to money.
So, get this process of elimination and decide on your plan fast. The sooner you get squared away and decide your course of action the sooner you can be on the road to debt recovery.