Reasons Debt Increases Rapidly
There are many reasons debt increases rapidly. Years ago, credit card offers came by the multitude and rarely did credit card companies turn a person down. It was easy to apply for and receive four or more credit cards with huge limits. If you received six cards with $20,000 lines of credit, it was possible to run up $120,000 in debt in very little time.
You might simply be a shopaholic and have amassed huge levels of debt by making high-end purchases. Look at the craze over Manolo Blahnik shoes. Women love these shoes and pay hundreds to own one pair. In fact, it is hard to find a pair of Manolo Blahnik’s that cost less than $600 per pair.
College loans add to your money woes. Many college tuitions are now upwards of $50,000 or more for a full four-year program. Textbooks and supplies will add on thousands more.
Video: Higher Ed, Higher Costs
Debt climbs easily, especially if you use your credit cards for emergencies. You may need a new tire and many stores insist on selling tires in sets of four. You might need a new transmission racking up thousands of dollars in debt. A new furnace is another must-have that can easily mount debt of $5,000 or more.
Once you reach these high levels of debt, you may suddenly find it hard to pay your bills on time. Each late payment adds on fees of $40 to $50. If spend more than your allowable credit line, interest charges and over-the-limit fees add up quickly, increasing your total debt. Before you know it, you owe more than $100,000 and have no means to pay all of your bills.
Can Debt Settlement Help?
Debt settlement is a good solution when you are in over your head. With debt settlement, you use the services of a company who negotiates with your creditors to reduce the amount of money you owe them. It’s a better solution than filing bankruptcy because you are still paying; you just are not paying as much.
Companies rarely refuse a debt settlement offer because they understand the situation. Either they take what you can afford or they risk losing it all when you file bankruptcy. It’s a win-win situation for both you and your creditor.
To qualify for debt settlement, you must have been unable to pay your bills for at least three months. This results in collection departments talking about suing you to get the money. You must also have lost your job or source of income due to layoffs or a medical situation.
If you think debt settlement may help you, please fill out the form located above. Our experienced counselors can assist you in becoming debt free.
Bankruptcy as a Last Resort
Bankruptcy laws have changed in recent years, making it harder to file for bankruptcy without penalty. Bankruptcy doesn’t pay off all debt. Mortgages and car loans must still be paid if you plan to keep them. In addition, student loans are not discharged with bankruptcy.
Once you’ve filed for bankruptcy, bill collectors cannot continue to harass you. Your utilities will not be disconnected and your wages cannot be garnished. There are downsides, too.
Bankruptcy stays on your credit report for ten years making it impossible to buy a new home, rent an apartment and get car or personal loans. Bankruptcies are public information, so your name may make it into newspaper listings causing embarrassment to your family, especially older children who are sensitive to what their peers think of them.
Video: Bankruptcy Myths (Bloomberg)
Breaking Old Habits
No matter what solution you use to help get out of debt, it is critical to refrain from repeating past mistakes. Attend financial management workshops. If shopping was an issue, look for groups that help support fellow shopaholics breaking them of their old habits.
Downscale your way of living. You don’t need a huge house or apartment. Learn to live on a budget. Use coupons to cut grocery bills and buy generic brands rather than gourmet items.
The key to staying out of debt is to remember to spend only what you can afford. If this means going into a store with cash rather than a checkbook, do it! If you spend too much, decide what is a necessity and what can be left behind.
Put a portion of your weekly paycheck into an emergency account. Use this account only when it is necessary. Whatever method you use, just remember to live within your means. It’s the only way you can remain debt free!
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