Garcia & Gonzales, P.C.
6 Strategies to Avoid/Limit Debt & Save Your Credit
Like it or not, accumulating debt has become an American tradition. Just look at our government, which is about $20 trillion in debt. Individually or jointly (married), we’re not much better, seeing as 80 percent of Americans are reportedly in debt with an average debt burden of $67,900 hanging over our heads, according to a 2015 report by Pew Charitable Trusts report.1 There is a slight bright side to these figures, because 44 percent of those in debt are there because they are carrying a home mortgage, which helps consumers build equity and financial value.
Getting ahead and buying a home is the quintessential American dream for most of us, but getting there can be a double-edged sword. In order to buy a home, individuals have to amass a decent credit rating – meaning they need to take out other loans or use credit cards to prove they are good for paying back their debts before lenders will consider signing off on their home loans. But, as most of us know, life can throw us some curve balls at times, such as losing a job and making it a seemingly impossible task to pay off our debts. If you are in that sinking ship scenario, here are six strategies to consider when things appear to be irreversible.
Sell Off Some of Your Assets
If you are fortunate enough to have some investments that you can liquidate, it may be a good idea to sell some off in order to make your debt more manageable or pay it off completely. If you are over your head, and you’ve taken the time to see what your debt-to-cash-flow ratio is, and you appear to be coming up short of being able to pay your debts, then you need to take action immediately. If you linger at this stage, you’ll either face collections or worse. Here’s some items that you can even sell on Craigslist or EBay:
- Valuable collections (china, silverware, timepieces, etc.)
- Electronics (TVs, stereos, radio equipment, etc.)
You can always replace belongings, but you should do whatever it takes to avoid bankruptcy and save your credit.
Cut Back and Pay Off Debt
Have you taken the time to make a line-item budget to see where you can cut back at, and still be able to pay down your debt? Is it within the realm of possibility to stop a gym or country club membership, cable or satellite TV service, cell phone, or even magazine subscriptions? Some of these obviously run over $200 to maintain for some people.
Do you have enough time at night or the weekends to pick up a part-time job? If you need extra money, you need to be creative and be willing to sacrifice things of value in order to get rid of your debt.
Try and Work with Creditors to Assist You Avoiding Bankruptcy
Trust us on this one. Your creditors would rather get a marginal payment, than no money at all from you. If you talk to your creditors on a heart-to-heart level, and let them know you are hurting financially and doing your best to avoid a bankruptcy, they’ll usually come up with a plan to work with you. Lots of banks, credit unions, and credit card companies have programs in place to help those in financial distress.
Get Consumer Credit Counseling
Are you the kind of person that just doesn’t do well talking to creditors? If so, you can seek the assistance of a professional. You can explore online for a credit counselor. Make sure you read some reviews on them first just to make sure they are reputable. Anyone going through a bankruptcy is required to go through consumer credit counseling before filing a bankruptcy. So, why not undertake the action before it’s too late. Again, their debt management plan may seem unrealistic, but if you try some of the aforementioned strategies, you might find the payment is within your grasp.
Find Out if Family or Friends Can Help
Sometimes friends and family would rather help you out and become benefactors, than see you take a hit like bankruptcy. Be professional about it and present them with what amount will help you reach your intended goal, as well as how much you can contribute. Also, be sure you have a plan in place that details precisely how you can pay them back over time.
Plan a Settlement with Creditors and Debt Collectors
In the legal world, a settlement is typically seen as an admission of guilt or weakness, but in this case a settlement is still better than a bankruptcy. And, if you can make it out of your financial woes by means of a settlement, you’ll actually come out looking like a winner!
Our best advice is to never use a settlement company, because you’ll just be adding to your debt. Start with those that have been sent to collections first. Lastly, have the funds available to pay off the settlement amount once an agreement contract is made.
Contact a Denver Debt Relief Lawyer at Garcia & Gonzales, P.C.
We know there’s a lot of debt relief attorneys you can turn to, but we doubt you’ll find a more knowledgeable and experienced Denver Debt Relief Lawyer as ours at Garcia & Gonzales, P.C.
We’ve been in business for more than 40 years, and we have successfully helped many clients resolve their debt issues without going through bankruptcy. Contact us today by calling or email us using the contact form on this page.
1“A Whopping 80 Percent of Americans are in debt” published in MSN Money, August 2015.