The first alternative is to do nothing. Some people chose this option by default. They are too embarrassed
or confused to take action and so they simply do nothing. This
is not a viable option as the problems will
not go away with time. Your credit will suffer and
you will have increasingly unpleasant contact with lenders looking for payment. In
extreme cases this can lead to collections, repossession, and foreclosure.
The first alternative is to do nothing. Some people chose this
option by default. They are too embarrassed or confused to take
action and so they simply do nothing. This is not a viable option as
the problems will not go away with time. Your credit will suffer and
you will have increasingly unpleasant contact with lenders looking
for payment. In extreme cases this can lead to collections,
repossession, and foreclosure.
The second option is to pay your creditors in full. While not
many people are in the position to implement this plan it is a good
option for those who can. This may be accomplished by liquidating
assets (i.e. cars, boats, houses, real estate, stock) and using the
proceeds to pay the debt. Another avenue would be to transfer money
from a personal financial account (i.e. retirement account) to pay
the debt.
The third option is to obtain a debt consolidation loan. The
objective is to get one large loan to pay off all of the smaller
debt. Taking this route generally leads to a smaller monthly
payment. Often times the savings are substantial. The most popular
type of consolidation loan is called a home equity loan. This loan
places a lien against the home and is often referred to as a
2nd mortgage. Another possibility is to refinance your
mortgage and roll your debts into the new loan. Each of these
choices have potential tax advantages. In many instances you can
write off the interest on your federal income tax. (check with your
tax advisor to determine if you qualify)
If you are not a home owner you could consider transferring
balances onto one account, or seek an unsecured personal loan.
The fourth option is to obtain the help of a consumer credit
counseling service. A careful search should result in a reputable
non-profit organization designed to help you regain financial
stability. They will review your particular situation in great depth
and offer the appropriate advice on the necessary steps to take.
The final option is to negotiate a settlement with your
creditors. This can be done through an attorney, your credit
counselor, or directly through the individual. A settlement can
include paying the debt in full over an extended period of time, or
it could mean paying a lesser amount. Once an agreement has been
reached monthly payments are made until the debt is paid. If the
settlement is being handled through a credit counseling service than
monthly payments are made into a trust fund from which the creditors
are paid. Please note that any kind of settlement is likely to have
a negative affect on your credit, however, it is not NEARLY as
damaging as a bankruptcy.
