If the budget runs out of options and you don’t know where to turn here are two final options you may want to consider, as long as you know deep down you did everything to avoid them.
There are such times in life when you have to admit and come to the realization you are in too deep. You have tried everything consolidation, refinancing, every debt payoff technique ever invented, you downsized, you are working 2+ jobs, you cut your expenses in half, but still the numbers don’t add up and the debt and calls keep growing.
These are things to consider but know they should always be your last option because they will cause damage to your credit score affecting the future for years not just months.
We are talking about Debt Relief Programs and Bankruptcy. In honor of my full disclosure promise, these things I have not done and I still hope I can avoid.
Debt Relief Programs
These programs talk a good game about cutting your debt in half and making it more manageable. But as I found out after looking into it (yes like many people I heard cut your debt in half and thought it would be a good fit for us) it would only cause more damage than do good. Which is why I decided to try and knock my debt down and go down other avenues to solve our debt problem.
Let me tell you what I found out.
Yes, they kept the promise they would cut the debt in half or more but the way they did it would dramatically drop our credit score.
First, you will have to sign an agreement with whatever company you decide to go with. Then they tell you not to pay any of your debt bills that they chose to take on. They then inform you while they work with the companies debt collectors will be calling you, and you just inform them who you are working with. The calls won’t stop until 3-6 months depending on when a settlement is met. All awhile you will be paying the debt relief company month to month.
The debt relief company doesn’t pay the overdue debt bills until the billing company agrees to small payments. This is why they are calling you. Eventually, things do get paid and worked out, but this is after your credit score gets dragged through the mud and drops 100’s of points.
While you are paying off the debt relief company you can not get another loan or another credit card. If some of your debt problems are related to your bank you have to switch banks before anything starts. If you don’t have a bank account squared away before this takes place good luck getting a good bank account.
Now it is said for you to pay off the debt relief company it takes about 2 years if you try really hard to build back up your credit score. It could take up to 2 years for you to qualify for another low-interest credit card or loan. Plus some banks won’t take you on as a customer with bad credit. You can also kiss refinancing anything good buy. All this making hard to build up your credit. However, it is possible others have done it.
To anyone contemplating this avenue I need you to ask these questions
- I have done everything I can
- Attempted to refinance
- Sold my car for a less expensive one
- Sold my belongings for extra cash to pay for my needs
- Put my house on the market and downsize
- Attempted consolidating debt
I know I come off shaming bankruptcy, but truth be told this is the only option for many people and there is no shame having to do it as long as it is your last and final option.
I say this because I know two people who filed. One of which really needed it and she work hard for many years and is still busting her butt. It took her more than 2 years to get a decent bank account and even more to buy a house and get a good car loan without a co-signer. This girl learned her lesson and refuses to go down the road again.
Then there is the other girl I know she has not filed once but three times in a 15-year span. She gets co-signers doesn’t pay her bills except for things she wants to keep. She keeps throwing people under the bus and she has not learned her lesson. This is not okay, this is wrong. How someone does this and gets away with it is beyond me.
So here are some tips if this is the option you choose.
First, get a good bankruptcy attorney
Make sure you have no doubt about the option you choose
Understand that bankruptcy these days is not all or nothing. Some people that file are able to keep their houses and cars.
Make sure all your questions are answered. Write them down before any and all meetings and write down the answers so you don’t forget.
And again make sure you will have no regrets or think I wish I… when you look back at this decision.
Just like debt relief bankruptcy will drop your credit score you will have a hard time getting another loan or another credit card with a reasonable APR. If some of your debt problems are related to your bank you may be asked to leave the bank and may have a hard time getting accepted as a customer to a new one.
Buying a new car or a home will also be a challenge if your old ones were part of the bankruptcy. Then there is rebuilding that credit score that can take years.
Neither of these options is a bad choice if you are struggling but they should be the final option, not an easy way out. There is nothing easy about coming out of either of these options so I say think long and hard. Make sure there is nothing else you can do, and remember if the answer is I have tried everything and I am still sinking, the collectors are going to start calling any day now then yes file for either of these options. There is no shame in it, you do what you have to do to live.
Financial Task this month: If you are considering these options think long and hard if it is right for you.
Self-Task this month: Write this down and remember it “Your current situation is not your final destination. When you look back in a year it will all be different.” Then reach out and talk to a friend you don’t have to keep your struggles to yourself or in your family sometimes just talking to someone on the outside can give you a new perspective on your own situation.