Being in a situation in which you can't pay your debts is quite frustrating. More so because you never know what actions your creditors will take against you. It puts you in constant fear not knowing what the next call would be about. But you need not despair.
There are certain actions you can take to at least save the situation, if not wholly then at least partially. You have various options to choose from and your choice will depend on your financial status.
Here are some of your options when you can't pay your debts.
Do Nothing
Yes, you heard it right. Do nothing. But wait. Doing nothing is only an option if you’re 100% sure you are judgment proof. Being judgment proof means your lender can’t get a judgment against you even if they sue you. They won’t be able to collect anything from you.
To be judgment proof, you must satisfy the following conditions:
-
Lenders can’t seize (garnish) your income
-
Exemptions protect all your property
-
Your financial situation isn’t likely to change
-
All your loans are unsecured
If you don’t meet all the above four conditions, you have to do something. Seek for other options to remedy your situation.
Contact Your Creditors
If you have reached the dead-end in so far as your loan repayment is concerned, negotiating with your creditors can provide you with some relief. Different loan types will have various options you can discuss with your creditors. If you are dealing with mortgages, your lender can reduce the monthly payments or even suspend the payments for some time, but with a loan modification or forbearance. If you are dealing with a credit card loan, negotiating with the lender can help by lowering your interest rates or lowering your payments.
The first step in negotiating with your creditors is to know how much you can manage to pay every month. Once you know that, you can call them one by one, explain your situation and tell them what you are able to pay comfortably. If you suffered some medical problems, job loss, etc. explain and ask for help.
Seek Credit Counseling
If you can’t get help from your creditors, the next step would be to contact an accredited and reputable consumer credit counseling agency. Such an agency provides professional money management tips, housing counseling, debt counseling, and budget counseling. They can also refer you to other reputable agencies that can help.
Credit counseling agencies might also suggest working with a firm like Freedom Debt Relief to negotiate settlement deals on your behalf. They can contact your creditors and negotiate better terms on your behalf. If the negotiations are successful, they’ll create a debt management plan for you. And right about now, you might be saying; Freedom Debt Relief – is it a scam? Freedom Debt Relief is one of the leading debt consolidation and credit card debt relief agencies in America. They can help lower your monthly payments and interest without you having to file for bankruptcy.
Seek Help From Friends or Family
Friends and family can come in very handy when you are financially down. Even though this is a short-term option, they can help lower your debt burden. If you have some trusted friends, you can explain to them your financial position and ask for help. Even if they can’t help with the loan repayment, they can help you pay the bankruptcy attorney’s fees.
Consider Bankruptcy Protection
If all else fails, you can file for bankruptcy protection. This will provide you relief from your debts and give you time to reorganize yourself. The problem with bankruptcy is that it will stay in your credit report for ten years. This means within this time, you won’t be able to take any loans.
When you are deeply in debt, don’t make any decisions without consulting a financial expert. An expert will review your case and help you pick your options when you can't pay your debts.