Debt Management

With today’s difficult economy, it is easy to fall into debt and more difficult to get out of it. In fact, millions of Americans find themselves unable to pay their bills and buried in unbearable amounts of debt. One easier way to find relief from such financial trouble is to file for bankruptcy but this option also comes with negative consequences.

While filing for bankruptcy may offer you some financial advantages, this also prevents you from obtaining credit. It will stain your credit history and recovering from it is a long, drawn-out process. It will take years to remove that stain in your credit report and this history can even damage a career in finance or business. There are a lot of negative consequences to filing for a bankruptcy so if you find yourself falling further into debt, act right away before your debts become unmanageable that bankruptcy becomes your only option.  Here are some debt management tips.

1. Stop creating new debt

This may be an obvious advice but it’s worth repeating. You don’t want your debts to grow out of control so stop using your available credit. Instead of creating new debts and incur new interest, work on lowering your expenses by making lifestyle changes. You may consider downgrading your communication services/plans, or get rid of subscriptions you can live without. Assess your expenses and you may also be able to find financial leaks, which are small and unnecessary expenses that when accumulated over time, can eat up a big portion of your budget.

2. Talk to your lenders for alternatives

Your lender may have better repayment options for your situation to help you manage your debts. They may also offer you a change in terms, lower your interest rates or make your payments more manageable. So before you go ahead and make a debt reduction plan, talk to your lender regarding your situation and check what they can offer you.

3. Have an accelerated debt reduction plan.

This involves organizing all your debts and determining which ones must be paid first. One strategy to do so is to make minimum payments on all of your debts except one. This allows you to concentrate on one debt that must go first, and when it is completely paid off, you move on to the next one. And the cycle continues until you free up more money to pay the last debt to be debt-free.

Accelerated debt reduction plans have been proven very effective programs in managing your debt. Debt management is not an easy feat and is not an overnight thing.  But it is the only way to avoid the harsh consequences of filing for bankruptcy.