I’ve gotten myself into a bit of a financial jam. I knew the basic rules of personal finance, or at least I think I did, but somehow I ended up breaking them and got myself into debt. I have credit card debt (multiple cards’ worth, in fact) and student loans and creditors calling me on the phone, and the whole thing has become a total nightmare. I’m kind of freaking out, and I don’t know what to do. Experts, how can a person get rid of their debt and get back on their feet? I want another chance to be smarter with my money.
Nobody sets out into the world intending to go into debt. We each do our best to make ends meet and budgets balance, and we each hope to save money and build wealth. However, it’s not always possible for us to keep our finances stable. A startling number of Americans live paycheck-to-paycheck or, worse yet, drowning in debt. The majority of Americans would have to take out a loan to cover an unexpected expense of $400. Those sorts of unexpected expenses arise pretty often.
Once in debt, it’s hard to get out. Our loans and credit card balances generate interest, and debtors may find themselves struggling to pay off that interest, which leaves the principal amounts untouched, ready to generate even more interest next month. In fact, sometimes the overall amount of debt can grow over time, even though we’re making payments. This is the cycle of debt, and it’s as real as it is dangerous.
Your situation is serious, but it’s not uncommon or shameful. What you need to do now is to consider your options.
For starters, you need to take stock of your entire financial situation. Do the math and figure out just how much you owe, and to whom. The severity of your situation will determine which solution will suit you best.
Consolidating debts is one option to consider. With debt consolidation loans from a reputable company (watch out for the less reputable ones!), you may be able to combine your debts and make more affordable payments to reduce the total debt over time. Similar options include moving credit card debt to cards with lower interest rates. However, be aggressive about paying those debts off once you do, because every type of credit card will hit you with interest sooner or later!
If your situation is serious, you may want to keep in mind which sorts of debts can be discharged in bankruptcy. If you end up in bankruptcy, you may regret desperate payments against debts that were later discharged — payments that you could have made toward things like student loans, which will be with you even if you do complete the bankruptcy process!
Speaking of bankruptcy, it is your final and most serious option for getting out of your tough financial situation. Bankruptcy is a big step, and it will be very bad news for things like your credit rating. However, it’s not the end of the world, and it is a valuable and important tool for Americans who simply cannot make their finances work. If you think bankruptcy might be an option for you, then you should speak to an attorney who specializes in bankruptcy law. Only a licensed attorney can help you decide if bankruptcy is right for your specific situation.
Accruing debt can become stressful, but you’re doing the right thing by taking your situation seriously and looking for ways to improve it. Stay focused and work with trusted experts, such as lawyers, to get back on your feet. We wish you all the best.