This article is a collaborative post and includes affiliate links. Please see the disclosure page for more information. Disclaimer – always verify Financial information with a professional and follow all laws for your location.
Being saddled with a large amount of debt is never fun. You spend your days worrying about how you’re going to pay it back and what action creditors may take against you. You might be dealing with creditors that are relentless. It’s a constant drag on your productivity and enjoyment of life. And that’s why I hate credit cards. But if you are like the 191 million Americans that have on average of 2.7 credit cards, you probably have debt.
Guess what – it doesn’t have to be that way! It turns out that there are some rather simple ways that you can deal with creditors and get outcomes that favor you while still honoring your responsibility to pay off the money you have borrowed. Thankfully, you don’t have to live your life in a state of constant depression. You have multiple options that you can use to improve your life and, perhaps, move forward towards financial freedom. Here are some of the things that you’ll want to try.
Find Out Whether You Need To Negotiate
It can sometimes seem like you have a lot of debt. But when you crunch the numbers, you discover that it is actually quite manageable. Being overdrawn $1,500 on your credit card might look like a disaster, but if you’re making $5,000 a month, it should be something that you can fix relatively easily.
Real problems start when you have more debt that you can actually pay for with your current income. An example would be $20,000 of unsecured debt on an income of $2,000 per month. In a situation like that, interest payments can soon spiral out of control. It would have been better if you never got into this mess but what is done is done.
Spend some time going over the figures and find out how much of your monthly income you need to dedicate to pay off your debts. If the amount you need to spend exceeds your disposable income after you pay for essentials, you’re in trouble. Once you know your financial situation, present the evidence to your creditors. Show them that, as things stand, it is materially impossible for you to pay them back.
Most creditors want you to avoid going into bankruptcy because that usually means they get paid less, and so many are willing to reduce the interest rate you pay. Some will even put a stop on interest payments altogether to give you time to pay back some of the principal. Whatever you agree upon with the creditors as means of monthly payments, don’t skip any. You are getting a break from the people you borrowed money.
Go Through Your Expenses And Cut Whatever You Don’t Need
The next step is to figure out whether you are spending your money on things that you actually need to survive. Food, taxes and rent are all essentials that you can’t avoid. But other costs, such as subscriptions or eating out at restaurants or expensive vacations or anything that is not on sale, are things that you can cut. Check out Dave Ramsey’s program Financial Peace to learn about saving money, creating budgets, and quickly paying off debt.
When you cut unnecessary costs, you soon discover that your debt becomes more manageable. All of a sudden, you’re able to afford repayments when you couldn’t before. It’s just a question of sticking it out. Reducing your consumption to ultra-low levels for a long period of time is a challenging process and something that can go on for years and years. Like Dave Ramsey says, “Beans and rice people.” Most people say that it is worth it at the end of the process to be out of debt, but that doesn’t make it any easier when you are going through it. Many times, you have to say no to invitations to go out with friends and family because of money troubles or if you do go out be sure to eat dinner ahead of time and just order a coffee or a soda at the restaurant.
Stick To Your Story
Don’t change the story you tell your creditors. Provide them with the same details every time as to why you are experiencing financial stress.
In light of this, writing down your situation with financial specifics is a good policy. Dictate it over the phone to your creditors every time they ask, if necessary. Don’t deviate from the truth and make sure that whatever you tell them is the truth so that you don’t have to backtrack later.
The more you stick with a consistent story, the more likely your creditors are to take you seriously. Make it clear that you are going through a difficult situation, preferably that you didn’t cause yourself. For instance, tell them that you lost your job due to the pandemic or that you are suffering from a long-term illness that limits your ability to earn money.
Tell Them That You Are Considering A Chapter 7 Bankruptcy
Professionals will often suggest that you tell your creditors that you are considering bankruptcy. According to Leinart Law Firm, a practice with more than fifteen years of experience helping clients with such matters, a Chapter 7 Bankruptcy can occasionally be the only option for financial problems. (See more info on Chapter 7 Bankruptcy on their website). The reason, according to the law firm, is that it gives people a fresh start when there are no more options to honor your promises to pay off debts.
With this type of bankruptcy, the person applying doesn’t have to file a payment plan. They don’t have to sell their property either. So many creditors have to accept that they won’t receive any payment. Naturally, you should want to avoid this and they want to avoid it as well, which is why if you mention bankruptcy, they are more likely to offer you favorable terms. They would still prefer to recoup some money out of you than none at all.
Don’t Tolerate Bullying
Even reputable creditors can get heavy handed with you when chasing up debts. They may make all kinds of threats and even resort to outright bullying to get the money they believe you owe them. Never give them your bank account information and if possible pay by check so that you have a paper trail to prove you have paid what you have paid.
Just remember your rights. Creditors are not allowed to do any of the following:
- Force you to repay debts that you don’t owe
- Harass you while you are at home, at work, or enjoying leisure time
- Publicly shame you for debts that you are unable to pay
- Set up social media or websites talking about how you can’t pay your debt
- Pretend that they work for the government or IRS to make you pay them faster
- Threaten you with arrest if you fail to pay them the money that you owe
Please remember when dealing with creditors that all they are trying to do is get their money back. So whenever they try to contact you, it is worth remembering the above list.
Write Down Notes
Listening to everything that your creditors say to you on the phone can be hard when you are stressed out of your mind, worried about whether you can pay them back or not. Many people, therefore, keep a pen and paper handy so that they can jot down anything important that reps say.
Whenever you speak to somebody on the phone, write down their name and the time of the call. Also keep a note of the length of the call. If you notice any bad behaviors, jot those down too. Try to record phone calls if you can as legal professionals may be able to use these to defend you against misbehaving creditors in the future.
Save Your Mail
Avoid the temptation to simply allow mail from your creditors to pile up in your mailbox. Instead, read and keep all your correspondence so you know where you stand. If you ignore letters, things can get out of control quickly. Creditors will go through their collections process which usually involves hiring agencies to physically collect debt from you.
If you don’t speak to lenders, you’ll have to deal with collectors instead. And they operate under different incentives and legal rules. They aren’t interested in negotiating your interest rate. Their main concern is simply taking your stuff so that they can recover their clients’ funds.
Always Chat In A Friendly Way
You might feel awful on the inside, but try chatting to creditors in a friendly way. Even though they may feel like a faceless organization, they are just a collection of people, like any other. And, for that reason, they are susceptible to emotions. Reps are much more likely to want to help you if they enjoy speaking with you on the phone. Remember, most people they call will not be so nice.
Even if talking to them directly on the phone is unpleasant, remember that creditors will never come to your home and confront you directly unless your vehicle or something is being repossessed. They can’t deprive you of the resources that you need to live like water, food, etc, and so dealing with them on the phone doesn’t need to be an unpleasant experience.
Just chatting to them with kindness is a great way to get them on your side. Keep your story consistent and simple and make sure to let the rep know you understand they are just doing their job. If they just continually ask you for money, try to turn it into a therapy session for the rep and cut the conversation short.
Negotiate The Type Of Debt You Owe
The type of debt that you owe will affect your approach to negotiation. If COVID has affected your ability to pay mortgage debt, you may be able to apply for a hardship forbearance. This is a special tool that banks use to reduce debt burdens and help people get their finances in order while they are out of work.
If you owe credit card debt, you might be surprised how easy they can be to negotiate. Credit card debt is unsecured, so most companies can’t come after your assets. They are often willing to reduce their rates if they can see that your debt pile is becoming unsustainable. Student loan debts can’t be written off. However, some companies will negotiate down the interest on the loan.
Debt is a burden on your mind and your life. The quicker you pay it off will be the quicker you lift the stress off of your shoulders. Do your best to pay down what you owe to have a better future.
Click here for more Finance articles.
If you are feeling down or depressed for more days than not, please seek medical attention. If you are feeling like you cannot go on, please call the suicide hotline at 1-800-273-8255 or chat here>>> https://suicidepreventionlifeline.org/chat/ Or visit the suicide prevention lifeline at https://suicidepreventionlifeline.org/
",
source:"wp"
});
[…] you are struggling with debt, an attorney can advise you on the best course of action, whether it be bankruptcy, debt […]