While the business of America may be business, the American way of life may be debt. Millions of consumers are in of debt of varying degrees with mortgages, car loans, medical expenses, student loans, and credit cards. Business owners are more often than not in debt. Banks, lenders, check cashing companies and credit card companies thrive on debt while charging interest rates of more than 20% in many cases.
If you are an individual or a business swimming in debt with no end in sight, there are options that you can explore to help you eliminate debt and alleviate the stress that overwhelming debt can produce.
- Debt settlement. This is a possible way to settle a debt by negotiating directly with the creditor. Of course, the creditor must be willing to negotiate and many are if you can convince them that a reduced interest rate, reduced principal or a lump sum payment is their only option in lieu of you defaulting or declaring bankruptcy. If you want to use a debt settlement company, do your due diligence since many are not reputable and charge large fees regardless if they succeed or not. Even if they tell you that your debt will be reduced, you still have to pay them a percentage of the debt or an agreed-upon percentage of the amount being saved.
- Create a plan and budget. Make a list of your business debts and see what is being paid out and compare it to your monthly income. Place your debts in order of priority and concentrate on paying off the ones with the highest interest rates first or call them and see if they can lower their rates.
- Only keep 4 open business credit accounts. You do not need more than this to maintain a solid credit history. Focus on paying off an account if you have more than 4 open credit accounts.
- Debt consolidation. Banks and other companies offer debt consolidation programs that combine all your debts into one monthly payment, usually stretched out over a period of years. It does reduce your interest rate and monthly debt payments overall though you will be paying more money. Consolidating your debt can protect your credit score, simplifies your debt management plan, and gives you a lower interest rate. Be aware that if a debt consolidation company or bank wants property such as your house or business as collateral, you could lose that property if you default.
- Get a second job. If you have the time, consider getting a second job, which may not be as difficult as it sounds. Having an extra $400 or so each month can make a huge difference. If you can write on a particular subject such as health, law, medicine, business, fashion, gardening or sports, there are numerous online sites that advertise for writers. If you have talents in sales or marketing, design, customer service or in the tech field, online sites such as Odesk offer opportunities for you to work at home on a part time basis. If you like to drive, the new ride-sharing phenomenon headed by Uber and Lyft can make you hundreds of dollars per week and allow you to work whenever you wish.
- Refine your spending habits. Anyone can cut down on needless expenses. Where does your disposable income go each month? Instead of a $4.00 coffee drink every day, get a $2.00 coffee or make it at home or drink the weak office coffee. If your gym membership is $150 per month, there is 24-Hour Fitness or any number of other smaller workout facilities that cost only $20 to $50 monthly. Stop eating out so much and learn to make meals at home. The savings will surprise you.
- Meet with a business consultant. If your business is suffering, it may be time to lay off employees or move into a smaller office once your lease expires. Meet with a business consultant who can review your goals and suggest ways to reduce expenses, negotiate with creditors, reduce principal loan payments and streamline operations.
- Consider bankruptcy. Bankruptcy is not a dirty word. If you are overwhelmed with debt, are in arrears on debt payments, are only paying the interest on credit card debt of $15,000 or more, have a car loan, and eating baloney sandwiches three times per week, compare the pros and cons of bankruptcy. If you are a small business and wish to continue your business operations, then a Chapter 13 repayment plan can accomplish that by offering a 3 or 5 year plan to repay your creditors, often at a reduced amount. A Chapter 13 can eliminate a second mortgage and any other unsecured debt left unpaid after the plan is completed. If you are an LLC or other corporate entity, then a Chapter 11 reorganization can accomplish the same goals, though this is more complicated chapter and requires an experienced Chapter 11 attorney to help you prepare the petition and draft a workable plan that will be confirmed. Under Chapter 11, unexpired leases, employment contracts, equipment leases and other executory contracts can be rejected and renegotiated on more favorable terms for you.
If you need help eliminating debt from your life, contact DCDM Law Group today.
- Defaulting. No one wants to default on a debt but it does happen frequently. Creditors will charge off a debt it considers uncollectable. The creditor gets a tax break by doing this and is prohibited from any further collection but it will often sell the debt to a collection agency at a reduced rate that can initiate collection activities. Often, debts are sold over and over in this manner. Your choice in this case is to either negotiate a settlement that is far less than your original debt or simply ignore the collection calls and letters. In many cases, the collection agency has no evidence or proof that you owe the debt at all. Any documentation by the original creditor was likely destroyed. You can simply ask the collection agency to send you proof of the debt owed. Do not agree to anything in writing or on the phone that you ever owed the debt and if no written proof is promptly sent, then you will know that the agency will not prevail in court and will stop its activity.