First there was the pandemic, which upended the labor market, leaving many people struggling to get by. Now we are grappling with inflation and all the fallout from that. So, a lot of people are hurting. Perhaps you are in that number, and things have gotten serious. Don’t despair, though, because you have options if you can’t pay your debts. Here they are.
Assess Your Financial Situation
You must know what you’re dealing with, and how long you’re likely to be in financial difficulty. Determine the types of obligations you have and which debts you should focus on paying. You should also apprise yourself of wage garnishment caps in your state of residence and determine whether there are exemptions that protect your assets.
Let’s take a closer look, since the above moves can help you determine your remedial course of action.
Are Your Difficulties Temporary Or Long Term?
With temporary financial difficulties, you might be able to get back on top of debt payments if you simply have more time. If it is long-term, though, your solutions may be debt settlement or bankruptcy, though you generally want to avoid the latter.
What Kinds Of Debt Do You Have?
If it is secured debt, which means it is tied to collateral, you are at risk of losing your property to repossession or foreclosure. If it is unsecured, such as credit card debts, your wages could be garnished, or your bank account could be levied.
Which Debts Should You Repay?
If you cannot pay all your bills, you’ll need to prioritize them. High-priority debts, for instance, can include those that are secured. These typically include mortgages, car payments, and unpaid taxes. Some unsecured debts – child support and federal student loans, for example -- should also be high priority. Credit card debt falls somewhere in the middle, but you don’t want to go down that rabbit hole, if you can help it. If you need debt resolution, go to www.achieve.com.
Are You Protected By Exemptions?
It depends on your state, but your debt might fall under exemption laws, depending on what type it is. You may be wholly or partly protected from creditors, in terms of garnishments and such.
Which Option Is Best For You?
Sit Pat
That is correct – you can try to do nothing. But that is only an option if: your earnings can’t be garnished, your property is protected by exemptions, your circumstances are long-term or likely permanent, or your debt is unsecured.
Negotiate With Creditors
You can do this yourself or hire a company such as Freedom Debt Relief, which has vast experience and success in such negotiations. Creditors want something rather than nothing, so you may be able to achieve real savings here.
Seek Out A Credit Counseling Agency
If your situation isn’t acute, you may want to get help from a credit counseling agency, which can help you with money management and budget counseling and may work with your creditors to establish a debt management plan. To find a counselor, check out the National Foundation for Credit Counseling.
File Bankruptcy
They don’t call this the solution of last resort for nothing, since depending on the type of bankruptcy you file – Chapter 7 or 13 – the filing could stay on your credit report for a decade, and you could also lose all or most of your assets.
Apply For A Student Loan Payment Plan
Don’t wait until you are way behind to seek help. Possible solutions depend on the loan type. Contact your loan servicer to explore your options.
Ultimately, your options if you can’t pay your debts depend on several factors, including the debt type and whether your circumstances are temporary or more long lasting. So you must choose wisely. Just don’t wait too long to ditch your debt.
