If you are feeling completely overwhelmed and drowning in debt, you need to realize that there are several options available to you for reducing and eventually eliminating your debt. Most people think that filing for bankruptcy is their only choice, but there are other debt solutions available for you to consider.
The first thing you should do if you are having trouble making your payments is to call your creditors and explain your situation. You may be able to negotiate for lower payments or change the due dates on your payments. If you ignore the situation your accounts may be closed and your debt turned over to collection agency.
One option is to try to come up with a budget and stick with it. Many people don’t have a very clear idea of where their money is coming and going. You may be able to get your debts under control if you can learn to track your spending and stick to a budget. The first step is to make a list of all your income and monthly expenses. At first you may not be able to list all of the places where your money is going. Write down all of your spending for a few weeks so that you can see where your money is actually going. Once you have this knowledge you can use a budgeting software program like Quicken to set up a budget and track your income and expenses.
If you are having trouble setting up a budget or managing your money on your own you can seek the help of a credit counseling service. A credit counselor can help you set up a budget and help you come up with a debt management plan to pay down your debts. A formal debt management plan is when you agree to deposit a specific sum of money with the credit counseling agency every month. The credit counselor then pays your unsecured debts out of this money. A credit counselor may be able to negotiate lower interest rates or get late fees waived for you. This consolidates all of your bills and you just need to make your payment to the credit counseling agency each month.
Another option may be for you to consolidate your debts by taking out a home equity loan if you have that option available to you. You will have to put your home up as collateral for the loan, but doing this will most likely lower your interest rate on your debt and you will have just one payment to make.
Finally, you still have bankruptcy to consider, but is should be considered as a last result. A bankruptcy will be on your credit report for ten years. This can make is hard for you to obtain credit, certain jobs, housing or insurance. However, if your financial situation is severe a fresh start may be your best chance to turn things around.