According to the St. Louis Federal Reserve, the American government, businesses, and people are nearly $60 trillion in debt. It is reported that private debt makes up the large majority of this deficit. We live in a culture where capitalism is King. It has become socially acceptable to spend more on our shoes, clothes, cars, and jewelry than we do on our own children’s educations, investments, or retirement. The western world is one of excess and over indulgence. As a people, Americans are well known for our gluttony and opulence. While we make claims of concern about misfortune in other places, our wastefulness, indifference, and poor use of resources tells a different story.
In such a climate, it becomes difficult to develop and exercise good habits that lead to a healthy financial life. Many of us don’t even know where to begin. Saving, investing, repaying debt seem more like a foreign language than financial options and strategies for many. As a result, many well meaning and hard working individuals find themselves deep in the pit of serious debt. This type of debt can leave one feeling oppressed, depressed, and hopeless about their chances of escape.
When you’re in a bind, it’s never easy to see your way out of it. It can be especially difficult to look ahead when debt is concerned. Whether you live on a fixed income or salary or have some flexibility, most people are able to project their expected monthly income. Any debt that stretches the budget beyond those projections quickly becomes a source of stress and anxiety. Serious debt is not to be ignored. Facing the problem head on and taking control of the situation is always the best approach.
LENDERS AND DEBT COLLECTORS: Know Your Rights!
The process begins with seeking out education and information about options and alternatives. If you’re struggling to keep up with payments, your first course of action should be to contact your lenders and financial institutions. Lenders commonly offer flexible payment options to individuals with good payment history who are experiencing financial hardship. If your accounts have already been sold or handed over to debt collectors, know and exercise your rights!
Debt collectors may contact you by mail, phone, fax, or in person. They are required to contact you during reasonable business hours unless you otherwise agree (8am-9pm). You are protected by law from any harassing behavior such as repeated frequent calling and you can stop the continuous contacts by submitting a letter directly to the agency. Your letter will stop all action except notification of intent to bring legal action against you.
BANKRUPTCY: Is it really your best option?
In the most desperate of financial situations many consumers consider bankruptcy as a viable option for relief. Here’s what you need to know before making your final decision. Both chapter 7 and chapter 13 bankruptcy are detrimental to your credit history and your future financing potential. With chapter 7 bankruptcy you may be absolved from responsibility for the large majority of your outstanding debts. You may, however, be required to liquidate some or all of your assets in an attempt to pay off as much of your outstanding debt as possible. Also, there are certain debts, such as federal student loans, that cannot be included in chapter 7 bankruptcy filings and you will still be required to repay.
Chapter 13 bankruptcy has a more favorable reputation and may allow you to retain some of your assets. Under chapter 13 your car, home, and some other assets may be protected. Both chapter 7 and 13 are reflected on your credit report and will be a red flag for potential lenders for up to ten years.
After taking the time to assess the damages and determine a course of action a feeling of hope and empowerment will inevitably begin to settle in. You have made the first steps towards financial freedom and re-claimed control of your life. Do not be intimidated by debt collectors, threats, tactics, or strategies used to compel you to pay when you know you cannot. There are options available and only YOU will have to live with the consequences of the financial decisions you make today and their impact on your credit, your current quality of life, and your future.