Some debts can help you build wealth; borrowing money to buy a house or paying for your college education with student loans will generate income in the future. Consumer debts, such as auto loans, personal loans, or credit cards, will not increase your net worth or future income because the purchased items depreciate quickly, thus becoming worthless. When debt is allowed to spiral out of control, managing debt becomes more difficult.
In a Hurry? Dial +18-503-850-342 Now!Managing Debt Around These Three Steps
Step 1: Stop Accruing Debt
Getting into more debt will be the first step to take in managing debt. To prevent accruing more debts, abide by the following suggestions:
- Budgeting– An established budget is vital in managing expenses and debts. Choosing to pay interest will deny cash flow to achieve other financial goals. Set financial goals and budget towards achieving them.
- Emergency fund– Nothing may be the best way to prevent debt like an emergency fund. This is money set aside for unforeseen expenses. The amount saved will vary depending on different situations. However, it is generally safe to have 3 to 6 months’ expenses saved up.
- Insurance– Insurance is yet another great way of avoiding debt and can be considered as an emergency fund or savings. Make sure you have sufficient insurance for your home, vehicle, business, and renters’ property.
Step 2: Pay Off Your Debt
The very top priority should be put on getting those debts cleared immediately. This means you need to be aware of how much debt you actually owe and how much interest you are paying. When managing debt, pay off any debts that attract high interest and those with considerable fees or penalties first. After writing your debts down, use these debt clearance strategies.
Snowball Method
- This method provides quick wins for a person by clearing small debts quickly.
- List your debts in order of the smallest to the highest amount.
- Pay the minimum on all the debt except for the smallest.
- Apply all of your extra money to pay off the smallest debts first.
- Keep on going until all debts are paid.
Avalanche Method
This payment approach can help you with your heavy debts much quicker, allowing you to work on your bigger debts with the higher interest rates. Listing all of your debts, starting with the one with the highest interest rate. Paying the minimum amount on all debts except for the one with the highest interest rate. Use all extra money from your debt elimination efforts to pay debts with the highest interest. Repeat this cycle after the highest-interest debts are paid.
Negotiate directly with the creditors/lenders. You might be able to negotiate a repayment plan or settlement with your creditors or lenders. If you choose to pursue this, make sure you speak with a manager who has the authority and responsibility to change repayment terms. Additionally, get the agreement in writing.
In a Hurry? Dial +18-503-850-342 Now!Step 3: Be Very Careful
You need to be extra careful when dealing with companies that offer help managing debt. Ensure that the company you are dealing with and its offers are genuine. Choose the one that’s best suited to your situation.
Consolidation of Debt
A way to achieve lower payments while consolidating all loans into one. The borrower pays off the whole of his debt by funding it using a new loan. Best found if you can obtain a loan with a lower rate of interest; otherwise, you are simply shifting your debt to another transaction.
Debt Resolution
Debt settlement generally involves hiring a third-party company and paying the company to negotiate a lump sum payment of your debt for you, rather than paying off the entire outstanding debt. Such companies typically charge between 15 to 20 percent of your total debt.
Debt Collection
Check for the validity of the debt to avoid paying any funds. Disputing the debt collection matter is just right if you believe it was inaccurate. Florida has specific consumer rights regarding debt collection.
What Is Personal Bankruptcy All About?
Generally, bankruptcy is considered a last resort measure and is perceived negatively regarding a person’s credit rating. This is because any date filed against the applicant would stay on his or her credit file for 10 years after the discharge date. That marks the time frame for obtaining future credit, property, and life insurance to be harder, if not impossible, to achieve. And, when bankruptcy comes into play, it could just be the best option for one facing financial problems. A discharge is a court order stating that a person who files for bankruptcy will not be responsible for certain debts.
What Are Some Occasions Under Registered Types of Bankruptcy?
The two most common types of personal bankruptcy are Chapter 13 and Chapter 7 bankruptcies. The federal bankruptcy court is where you’re going to file. The filing fees can be several hundred dollars. Attorney fees are extra. For further information, visit the U.S. Courts.
Unsecured debts like credit card debts or medical debts can be discharged in both kinds of bankruptcy. They can also stop foreclosures and repossessions; they can also stop garnishments and utility shutoffs, and stop debt collection efforts. Exemptions might be granted, which let you keep certain assets. The amount of the exemption will depend on state law.
What’s the Difference Between Chapter 7 and Chapter 13?
In a general sense, Chapter 13 permits those who do have steady jobs to retain eligibility for their properties, such as houses and cars, during the duration of bankruptcy. A plan to repay some portion of their debts for three to five years without losing any property has been approved for them by the court. Once fully complete to the court’s satisfaction, Chapter 13 will discharge the debt of debtors.
Chapter 7 is a straight bankruptcy. In most situations, that implies that all nonexempt property is sold. Some examples of exempt property are tools needed for work, basic household furnishings, and a car. The appointed trustee will sell the property or hold it for the creditors.
Bottom Line!
The effective handling of debt begins with a proactive approach to managing debt and taking back control of your finances. The first step is to stop incurring new debt, which requires a good budget, an emergency fund, and sufficient insurance. Next is paying down existing debt, followed by exploring borrowing strategies such as the Snowball Method and Avalanche Method, as well as negotiating with creditors.
Finally, beware that caution should be exercised when searching for help from debt management companies, and carefully consider such solutions as consolidation, resolution, or possibly bankruptcy. Once you are aware of the differences between competitions, chapters 7 and 13, it would help make informed decisions for a fresh start financially.
If you feel like debt is dragging you down, just know that you are not alone. Bruner Wright PA can help with managing debt, remove all the worry, and simply see you through every process needed, from repayment methods all the way through the bankruptcy process, to reclaim your financial future.
Call us today for a consultation and become one step closer to a life free of debt.
Our seasoned Bankruptcy attorneys at Bruner Wright specialize in safeguarding your precious entitlement, organizing the financial side, and starting a new life with a healthier credit profile. Whether you’re fresh out of bankruptcy or working on getting organized after discharge, we can provide you with the road map to recover from bankruptcy and fit your very specific long-term financial goals.
In a Hurry? Dial +18-503-850-342 Now!