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by Kristie ThompsonYou are at your wits end.
Creditors are calling every few minutes asking for money. You would pay if you could. How can you make this stop?
Suddenly, you see an ad on television inviting you to consolidate your debt through bankruptcy. Is this the answer to your prayers?
Afraid not. This route will lead to more pain than you can even imagine. A bankruptcy stays on your credit file for ten years. This means you will have a hard time buying a house, a car or just getting a credit card for ten, long years. And a lot of creditors will not lend to someone who filed bankruptcy, no matter how long it has been.
That may not seem important now, but five years from now when you have a good job and want a house, it will. So, what can you do?
1. Talk to your creditors.
Call them - don't wait for them to call you. If you are like most people, you have been avoiding them. Call them and explain what happened. Most creditors, given a chance, are understanding. They would rather see you pay smaller amounts than file bankruptcy. Ask for a deferment or to refinance your loan. A deferment allows you to take this months payment and add it to the end of your loan. Refinancing makes your loan "new" again. You start fresh. Both of these solutions are short-term solutions and will add interest to your loan. But, you are making an honest effort to pay off your bills. If all else fails, ask for a settlement. This will have a negative impact on your credit, but not as bad as a bankruptcy.
2. Budget.
Do you really need call waiting, call forwarding, caller-ID, a cellular phone and a beeper? Not right now. Cancel cable. Check books out at the library instead of purchasing them. You can also rent movies at the library. Cancel every bill that is not an absolute necessity. However, do set aside some "fun" money. A few dollars will be enough to get you out of the house once or twice a month. This will help keep you from feeling that you are sacrificing too much.
3. Prioritize your bills.
Which bills are the most important? Pay your house payment first. You need your car to get to work so pay that second. Make sure you pay all your utilities. Next pay any secured debts. If there is money left, pay something to your credit card companies and other unsecured loans. The problem most people face is that they pay the creditors that call the most. Believe it or not, these are usually the finance companies and credit card companies. Then there is nothing left over for the mortgage or rent. Do not be pressured. Explain your situation, but pay the most important bills first. If you find that you are being harassed, write the company a letter requesting that they do not call you again. Make sure you do pay off your unsecured debts if you have the resources. Some states allow wage-garnishment and these companies are entitled to their money.
4. Consider counseling.
No, not a psychologist (unless you need one!) Try debt counseling. But do not use a place that charges an exorbitant fee! Try a non-profit organization such as Consumer Credit Counseling. This company will help you determine how much you can pay each creditor. They will then contact the creditor for you and make arrangements to pay that amount. Most, if not all, of your creditors will agree to the lowered payment. It will take some time, but you will eventually dig yourself out of the hole. No more harassing phone calls!
Apply the above steps before you consider filing bankruptcy. Fight your way to a secure financial future. Even if you have had problems in the past, most creditors will take a chance on you again if you show them you will strive to pay them back regardless of your circumstances.
Kristie Thompson is a former consumer finance manager who is currently pursuing a career in public relations. She is a contributing editor to Suite101.com's Developing Good Credit at
www.suite101.com/welcome.cfm/developing_good_credit
