Most Americans are in debt, but some are unlucky or foolish enough to accumulate so much debt they are unable to meet their monthly financial obligations. Creditors begin calling them and before they know it, they are in over their heads with late fees, interest-rate hikes, and threats from collectors. If this sounds familiar, it is important to understand your options, and your rights, when it comes to debt. By taking the guesswork out of your next step, you can alleviate much of the anxiety associated with debt problems. Consider speaking with professional legal counsel, like The Port Law Firm in Florida, concerning your options. The following list includes advice from them on what to do about your debt.
Pay the Debt
The most effective method of dealing with your debt problem is to pay it. Unfortunately, this is often the least possible method. Some people choose to liquidate assets like retirement plans or property, often leading to worse problems. If you do not have enough assets to liquidate and creditors file suit against you, you may lose the value of the asset and be left in the same position you were in before making a payment. Liquidating assets may also trigger penalties, especially in the case of IRAs and 401k plans. If you choose to liquidate in order to pay debt, it is especially important you speak with a professional.
Seek Credit Counseling
Numerous companies offer this service but it is important to choose one that comes with good referrals. Unfortunately, some companies try to take advantage of people in desperate situations. The purpose of these companies is to work with creditors to lower interest rates and create a monthly payment schedule on debt that is unsecured. Unsecured debt refers primarily to credit cards. Credit counseling can lower your monthly output of money, but it may not stop the debt from growing. The companies work with the creditors, and if a credit chooses not to cooperate, you will not only be paying the credit counselor, you will still be responsible for the other debt. For instance, if you arrange to have two of your debts handled by the credit counselor and you pay them $500 per month, but two of your debts refuse to work with the credit counselor, you will still have those debts due each month in addition to the counselor payment. Furthermore, creditors can still sue you even if you are working with a counselor. So while the process can help prevent bankruptcy, your credit will still suffer.
Debt Negotiation
Debt negotiation companies negotiate a settlement payment with your creditors. This may get you out of debt quicker and help you avoid bankruptcy. The downside of this is that the IRS requires you to pay taxes on the amount of money you save from the negotiation.
Consolidation
Similar to negotiation is consolidation. This is moving several debts into one, which can be beneficial, as long as you consolidate into another unsecured debt. Never consolidate by using a home equity loan without contacting a qualified professional because you could end up losing your home. The lawyers at The Port Law Firm will help you determine whether a consolidation loan is a viable option.
Bankruptcy
This is a legal option that allows you to start over without debt. If you believe your financial situation is not going to change any time soon and you have been unable to pay off your debts, this may be the route to take. It is important to work with a professional when deciding whether bankruptcy is right for you. It will effect your future, but it may be unavoidable. After filing bankruptcy you will have a difficult time not only getting credit but opening a checking account. It could take years before you qualify for loans ,which means owning a home, renting an apartment, or paying for school may not be a future option.
Do Nothing
Most people do not consider this an option, but it always is. If you are able to make only minimum payments on your debts, your balance will be more than likely continue to increase, especially if you are over the limit on debts or you have a large interest rate. If you continue to take no action, it will eventually result in creditors suing you for the money that is owed to them.
If you are concerned about your increasing debt, it may be time to consult a professional. The Port Law Firm will help you determine how best to handle your debt.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
