When it comes to eliminating debt, there are really only three broad strategies from which to choose. If you are struggling with debt problems, you should consider the “big picture” as you try to intelligently assess your options. Looking at the “big picture” will help you either solve your problems or prepare you to consult with a competent debt relief attorney.
Pay the Debt As Agreed
You may be thinking, duh! But, this is the first option to consider. Can you cut expenses? Maybe you’re eating out too much. Or, maybe you spend impulsively for items that you don’t really need. An honest and critical look at your budget and spending patterns might reveal areas that you can cut spending and use these funds to get your debts paid as agreed. Are your expenses cut to the bone? If so, can you increase your income with a part-time job? Maybe a raise at work? Or finding a better job? If you can’t cut expenses any further, a little more income might do the trick. You don’t need a lawyer or any specialized help with this. All you’re doing here is taking an honest look at your situation.
Negotiate with Your Creditors (aka “Self-Help”)
If you’ve cut expenses as much as possible and increased income is not anywhere in sight, you can attempt to negotiate with your creditors. This can be extremely tricky. What you’re basically trying to do is get your creditors to take less money than you owe or to agree to more favorable repayment terms than you originally agreed to. This approach might work with credit card debts or medical debt or any other unsecured debt. Negotiating with secured creditors (i.e., creditors who hold collateral for the debt) can be very risky and might lead to a loss of the collateral even while you’re trying to negotiate. This option is not going to get you anywhere if you’re the target of a debt buyer. And if you’re being sued, you need the immediate help of a competent debt relief attorney.
This option has many traps and pitfalls and even unintended consequences; so, if you choose this option, be very careful. If you’re successful despite the challenges, this option might bring you the relief that you need. With this option, you might benefit from proper legal advice; however, many times an attorney or other advisor has little or no better chance of making this option work than you do. And be extremely careful if you are considering a debt settlement company or organization. Many of these companies and organizations are little more than scam artists looking to relieve you of your cash, not your debts. For more on self-help, see my blog post from April 24, 2014 entitled Can You Work Out Your Debts on Your Own?
Formal Debt Relief
As a last resort, you may need to seek formal debt relief. This will usually entail filing a petition for relief in the appropriate United States Bankruptcy Court. Individuals will usually file a petition under Chapter 7 or Chapter 13 of the U. S. Bankruptcy Code. The main goal of a Chapter 7 case is to eliminate as much debt as is possible to enable you to begin anew financially with a “fresh start”. The main goal in Chapter 13 is to reorganize your debts and make payments that you can afford on that debt for a specific period of time. At the end of the time period, any balance not paid will be wiped out for most types of debt. Don’t even consider going at this option alone. You need a competent debt relief attorney on your side on this one. Filing and proceeding with formal debt relief requires competent and experienced legal counsel.
So, if you or your family is facing financial hard times, take a hard look at your situation. Get the help you need now, not later. Our lawyers are just a phone call away.