According to the International Monetary Fund (IMF), individuals and companies are piling on debt at levels last seen just prior to the financial crisis a few years back. The IMF reports that borrowing in the “non-financial sector” has surpassed the pre-crisis high. The “non-financial sector” is composed of governments, non-financial companies, and households. The rising level of debt could lead to potential risks down the road. Put more plainly, higher debt levels increase the risk of default on the debt if borrowers cannot pay the debt. Contributing to the increasing debt levels are low borrowing costs which make it easier to pile on the debt.
How Can We Fix This?
There’s no easy answer to that question. One solution could be to make it harder to borrow. However, that approach could lead to slowing economic growth which, in turn, can lead to greater risk of default. The IMF did note that near term risks have fallen and that banks in countries with advanced economies are financially healthier. But, the growth of the world economy has slowed.
Just like governments and companies, individuals whose debts pile up face risks too. While properly managed and controlled debt can be a good thing, such a situation can take a very bad turn very quickly. A job loss, a medical illness, or marital difficulties can quickly trigger serious financial troubles.
Three Common Options
When dealing with debt either as an individual or as a large company, the options usually are to pay the debt as originally agreed, negotiate a settlement or restructuring of the debt, or resort to formal debt relief. Many times, individual consumers face serious debt troubles which may quickly lead to a loss of their homes, motor vehicles, or other important property needed for safe and healthy daily living. Prompt action is often necessary when this situation occurs.
But What’s the Best Choice?
In many of these cases, resorting to formal debt relief is the best option. Chapter 7 can eliminate most, if not all, of a consumer’s debts and allow for a fresh financial start. Chapter 13 allows for the formulation of a debt repayment plan and serves to protect the debtor while he or she is making payments under the plan. Chapter 13 plans can last up to five years. In the end, the debtor is released from paying the remaining balances on most debts and can get a new financial lease on life going forward.
In any event, when faced with a financial crisis, two things are very important. First, DO NOT procrastinate. Sadly, over the years, I encountered individuals whose problems could have been easily solved and property saved, had they not kicked their financial problems under the rug. Don’t fool yourself into thinking that ignoring financial problems is a sound strategy. It isn’t. Second, you must get competent advice from an experienced debt relief attorney. This isn’t the area in which to consult with your general practice attorney. If you’re facing a financial crisis and you follow these two simple rules, the odds of a successful resolution to your problems is very high.
Our attorneys at Bond & Botes have several years of experience helping people file for debt relief. You’re not alone. Contact us at one of our many locations today for a free consultation and discuss your option.
Ed Woods is the Managing Attorney of several of the Bond & Botes Law Offices throughout Mississippi. He holds a Bachelor of Science from the University of Southern Mississippi, and a Juris Doctorate from Mississippi College School of Law. Ed puts his extensive knowledge of bankruptcy law to use defending consumers from debt collection lawsuits and more. Read his full bio here.