Problem debt is rampant throughout America. In addition to
mortgages and auto loans, the average household in the U.S. has
nearly $10,000 in credit card debt. As the major credit card
companies have recently doubled their minimum payment
requirements, now is a good time to outline the various options
available to most consumers who have more debt than they can
handle.
Stop spending money on nonessential items.
'Nonessential' is difficult to define, but it more or less means
anything that isn't absolutely necessary to live. Phone bills,
mortgages, and groceries are essential. Lattes at Starbucks,
satellite television, and meals from fast food restaurants are
not. By cutting out all extra spending, you can probably save
several hundred dollars per month. That money can be used to
reduce debt.
Consolidate your debt. If you have
more than one credit card and your accounts aren't all at their
limit, you can transfer balances from higher-interest accounts
to those with lower interest accounts. Alternatively, if you own
a home, you probably have accumulated some equity. You can
obtain a home equity loan or line of credit and transfer some of
your debt to that loan. As a bonus, the interest on home equity
loans is tax deductible. Be careful, though. If you transfer
your debt to a home equity loan, you can lose your home if you
do not repay it.
Find a reputable credit
counselor. This will soon be a prerequisite to filing for
bankruptcy, thanks to a recently passed Federal law. Counseling
agencies can negotiate with your creditors to help you establish
a repayment plan that you can afford. They may be able to have
interest rates reduced or have late fees waived. Most agencies
charge for their services, but the reputable ones limite their
fees to what you can afford to pay.
File for
bankruptcy. This is not a decision to be taken lightly, as a
bankruptcy filing will remain on your credit record for ten
years. By filing for bankruptcy, you declare to the courts that
you cannot repay your debts. Most consumers are currently
allowed to file under Chapter 7 of the Federal code, which
allows the courts to wipe out most debts. This will change this
fall, as recently passed Federal legislation takes place. The
new regulations will likely require a repayment schedule, and
attorney, and higher filing fees. Bankruptcy can help you get a
fresh start, but it's not a magic solution. It will be quite
difficult to reestablish credit after a bankruptcy filing
Having more debt than you can handle is a serious
problem, but like most problems, it is one that has available
solutions. The first step is to act promptly, as unattended
debts only grow larger. With time, patience and diligence, most
consumers can overcome the burden of excessive debt.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a site devoted to establishing credit,
debt consolidation and credit counseling.
Author: Charles Essmeier