People often reach a point where they just can't pay their bills. This is especially true in today's economy, which doesn't help the poor or even the middle class very much. Almost every part of daily life has changed because of inflation, such as food, gas, rent, clothes, utility bills, and more. At the same time, salaries have not kept up at all, especially in the lower ranges. When you can't pay your bills and still buy food and other necessities, you have to make some hard choices. Credit counselling and debt management services, or filing for bankruptcy, are the choices. Both have pros and cons, so which path to take depends a lot on the person and how bad their financial problems have gotten.
Credit counselling and debt management services are easy to find in most communities and on the Internet. There are many different kinds of services. For example, some charge fees and try to make money, while others are run by volunteers and don't charge anything. Some services have been approved or certified, while others have not. Some promise to keep things private, but unfortunately, others don't.
If you don't have so much debt that you can't get out of it, credit counselling and debt management may be the best thing for you to do. Here's how it works:
- Check out different counselling services in your area and on the Internet to find the one that fits your needs the best. Avoid those that charge a lot of money, don't promise to keep your information private, and don't have any credentials or accreditations.
- Most of the time, instead of paying your bills directly, you make one monthly payment to the counselling service. The service then splits that payment among your creditors based on the agreements you and your creditors have made. It gives you enough money to live on and stops the collection process. Over time, you pay off all of your debts, and it's like you're starting over, as long as you don't get into more debt in the meantime.
- The counsellor will look at your situation and help you come up with a plan to pay your bills. Most of the time, counselling services can get your creditors to take less than the full amount you owe them and give you more time to pay off your debt.
- Set up a meeting with the agency you want to work with. Bring as much of your paperwork and proof as you can to the appointment. This includes proof of your expenses and income, as well as proof of the debts you owe.
On the other hand, if you have too much debt and your creditors aren't willing to work with you to make payments, declaring bankruptcy may be your best option. There are many bankruptcy lawyers, and again, it's in your best interest to look around for the best service at the best price.
It is best to work with an attorney who does a lot of bankruptcy work because he or she will know the rules and regulations as well as the judges and bankruptcy trustees who work in the local system. A good lawyer will know what the trustees and courts will let you do and what they won't, and will be able to tell you what your best options are.
Individual debtors can file for bankruptcy in one of two ways. Chapter 7 and Chapter 13 are those. Chapter 7 is a way to get rid of all unsecured debts and some secured debts, with the exception of taxes and school loans. Most of the time, a debtor has to give up anything of value that can be sold to pay off debts. However, a person's home and main mode of transportation are usually safe. In a Chapter 13, you don't have to give up anything, but you do have to pay off all of your debts. The court just comes up with a plan for paying back your debts, and instead of giving the money to your creditors, you give it to the bankruptcy trustee. The trustee then gives the money to your creditors. Both types of bankruptcy have pros and cons, as well as requirements for who can use them. A bankruptcy lawyer is the best person to help you decide which option will work best for you.
Getting credit counselling or filing for bankruptcy can both help you get rid of debt and get back on your feet financially. Both can stop the collection process and stop collectors from calling and being annoying. The bottom line is that you don't have to keep going through hard times. There are ways to get out of debt and start over. The most important thing is to be careful with your money once you are out of debt so you don't get back into the same situation.
