Debt Consolidation Primer Four Things You Can Do to Get Out of Debt
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 isnt 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 arent
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 its
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.
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 establishi
ng credit, debt consolidation and credit counseling.
