Many consumers who are struggling with debt problems are badly in need of some debt management skills. When not handled properly, debts can spiral out of control and wreak havoc with not only an individual’s finances, but also their peace at home and personal relationships. While knowledgeable individuals can take control over some of their own debt problems and take remedial action, there are also various organizations that can help. Some of these companies are good, others are not. Whether or not consumers elect to hire a company, they should spend some time educating themselves on debt management advice. It may prove to be time well spent.
In spite of the abundance of information available about debt management advice, there are some myths that persist and are often repeated. Here are some of the most commonly heard myths along with a brief commentary on each:
- I should just pay off my unsecured debts with my home equity line of credit (HELOC).
- I don’t need to worry about my credit cards. If I need to I can just get a debt consolidation loan.
- Maybe things will improve and I’ll be able to pay off my balances. I’m not going to do anything.
- I’ll just declare bankruptcy like I’ve heard so many other people do.
- A debt management plan will help me to reduce all my debt payments.
Turning unsecured debt (e.g. credit cards) into secured debt (e.g. mortgages) may seem like an obvious answer, but once you examine the consequences more closely you’ll see that it may be a very bad idea. If you’re struggling with your debt, doing this may end up costing you your house, not just your credit.
Debt consolidation loans may have existed at one time, but that time has passed. Even consumers with excellent credit are having trouble getting loans in the current lending environment, so don’t count on this as being your ace up the sleeve.
Inaction is one of the riskiest choices you can make when you have worrisome debt. Most of the time things will get worse, not better, if you continue to do what you’ve been doing. At the very least, you should invest some time to educate yourself regarding your possible debt solutions.
Bankruptcy is just one of a number of debt solutions that you can choose from, but it has the most severe negative consequences of them all. A Chapter 7 bankruptcy is much more difficult to qualify for since the new bankruptcy laws were enacted in 2005, and you now will have to pass a new 2-part “means test” in order to even be considered for one. It is likely that you will be forced into a Chapter 13 bankruptcy with a repayment plan instead, and your credit will be ruined for 7 to 10 years. Lawyers also charge higher fees now that they have additional liability to consider in deciding whether or not to accept your case. Bankruptcy is appropriate only when there is no other choice that can be made.
The truth is that only unsecured debt can be included in a debt management plan. These debts include credit cards, personal loans, doctor bills and other debts that are not attached to a specific asset. But your other payments, such as your mortgages and auto loans or leases, will not be affected, nor will other types of debts including government loans, IRS taxes and credit union loans. Get in touch with a debt advisor by filling out the online form on the right and they can tell you which of your debts can be included in the program.
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[...] helping consumers become debt free for over 10 years. He is also a writer for Right Start LLC’s debt management advice blog, which aims to educate indebted consumers about the various credit card debt solutions [...]
[...] helping consumers become debt free for over 10 years. He is also a writer for Right Start LLC’s debt management advice blog, which aims to educate indebted consumers about the various credit card debt solutions [...]