By Cole Collins
So, you've found yourself in debts that you cannot control, and aren't sure what to do. For that matter, you're not sure if you really want to trust your finances to one of the debt management companies you've seen advertised or heard friends and co workers talking about. There are other possibilities, of course. Play the lottery, wait for some unremembered relative to grant an undeserved bounty, consider the value of the baseball cards cluttering the basement, or, simply, dig your head in the sand and avoid all worries about the credit card bills piling on the floor. In all likelihood, they'll have about the same chance of success in terms of debt management. Easy enough to imagine that things will work themselves out without drastic changes in your household spending or overall behavioral alterations as regards buying habits, but - save some miraculous gift of fortune - the creditors shall inevitably get theirs no matter the attempts toward purposeful ignorance. This is where debt management comes in. When dealing with a competent and trustworthy firm, after all, you don't have to worry about surrendering your problems to an external force. Debt management counselors will work with the borrowers hand in hand to aid them in their struggles and completely explain every step along the way.
At the same point, however, there are steps that can be taken before you first begin investigating debt management authorities. The businesses you eventually work with should even expect you to start looking through your financial obligations and making some decisions by yourself. After all, throughout the debt management process, there are certain rules of thumb that every borrower should thoroughly understand and guidelines that each household, regardless of how much money they may make or how tragic their financial status may be, should acknowledge. Think of the overall theory of debt management as a simplified flow chart. Eventual debt elimination should be the focus, of course. Aside from those secured loans such as home mortgages (which could reasonably be considered an investment) and the one or two credit cards every consumer should have (with low balances, paid monthly, to heighten credit ratings and FICO numbers), the goal of debt management is, after all, an end to debt.
To that end, until you've recorded all of the information from every creditor, you really don't know just what your debt situation is. Take the time to write down every important aspect of your credit card accounts (alongside whichever additional debts you may have accumulated) and put all of the obligations in order from the lowest interest rate to the highest. In most cases, you will want to pay off the highest interest rates first, of course, but there are other theories as to debt elimination - some debt specialists would advise taking care of the smallest balances before all else so as to provide positive reinforcement and propel the borrowers forward through their debt relief mission. Through all of this, of course, you have to still make sure that the minimum payments for each account will be satisfied every month on time. Ideally, your checks should even be sent early enough ahead so as to prevent the lenders from delaying processing of the payments and assessing further penalties or lowering your credit reports status. Also, much as you should remember to concentrate upon the debt with the highest interest rate (and, after that's done, work to pay off the next highest and continue in that pattern), you should not neglect the everyday costs of living nor avoid saving for unexpected expenses.
When thinking about debt management, there are more things to consider than just paying down the outstanding credit card balances. No matter what, especially in the current economy, you'll need to also consider those day to day expenses like gas and electricity and all of the other monthly bills. While it's true that, compared to the immediate action that results from missing a revolving debt payment, utility companies will be far more relaxed in their collection attempts. Since the majority of the utilities have to worry about some local government supervision, which means political repercussions should borrowers be left to freeze to death, they are remarkably malleable when forgiving a month or two of missed payments (without reporting such to the credit bureaus). Still, you have to remember, there will come a point where the utility company will have no choice but to halt services, and, above and beyond the effects upon your credit rating, that can come as a drastic, perhaps life threatening hazard to be avoided at all costs. You can't work on your books if there aren't any lights. Also, you need remember, once any utility service has been terminated, there will be additional charges to have that service to be restored. These are the sorts of what may seem like trifling costs that unwary or lazy borrowers let regularly accrue, and there couldn't be anything sillier than paying double the monthly bill (let's face it, you're going to want your water service restored) due to a week's avoidance of responsibility. Like most every thing involving debt management, you need to speak regularly with the representatives of the people that you send your money to as to avoid any future complications should problems arise. These utility companies are uniquely open to payment schedules that minimize borrower obligations and let their less fortunate clients lapse their burdens for length periods. For those especially poor off candidates, the government may even step in to subsidize some utility payments. This might sound humiliating to a degree, but debt management has its own momentum and, once again, there are certainly more grave consequences.
Above all else, desperate borrowers must remember to keep sight of the real dangers when attempting debt management. However unfortunate repossessions or lawsuits may be, the true threat wouldn't just be the attacks upon bank accounts or garnished wages or the loss of property. Any debt issued by the courts or the state or federal government should have a clear priority. While property taxes unmet inevitably necessitate a lien upon the property in question and themselves have the risk of a different sort of foreclosure, past due income taxes, more than anything else, must be dealt with else the scofflaw consumer face actual time in jail. The same could be said for child support or alimony or any debt that the courts deem so important that a failure to satisfy the obligations would threaten imprisonment. Student loans, on the other hand, though every former college student must face an ethical dilemma, won't ever land defaulted applicants behind bars. However, virtually all loans originated to help students through higher education have been protected through the United States treasury and, as such, maintain special powers such as the garnishment of income without the trouble of an actual trial. Since student loans have such enviably low interest rates and decade spanning payment schedules, though, there's virtually no reason that borrowers need worry about garnishment as long as they maintain a constant communication with the representatives of the lenders.
Come what may, tax liens and any debts actionable by the courts and their officers are of the utmost importance for every American citizen. Secondarily, you should take extra care with any property debt - particularly considering the current environment regarding real estate loans. Much of the negative publicity that has surrounded mortgage loan lenders should be laughed away as political positioning, but, through countless mortgages and equity loans handed down to home owners that were clearly not able to appreciate the challenges of the obligations they had signed on to accept, the home lending industry has taken quite a blow. As a result, refinancing is more difficult than ever for borrowers already stricken with debt loads they can't quite manage, and home equity can not be over estimated as the signal emblem of financial security. After all, do not just worry about the investment potential of the home (recent trends aside, there's no reason to assume that appreciation should not continue), this is you and your family's shelter! Foreclosure proceedings can be legally launched once you are only three months behind with your payments. To be sure, given the aforementioned glut of foreclosures currently afflicting Americans (and the accompanying bad publicity attached to the lenders themselves), there may be a little more wiggle room for defaulted mortgages. Still, though, after the first missed payment, it's always that much harder to climb back on your feet, and the home is the most important investment most Americans will ever have. There's no point to debt management if you end up losing your residence.
In the same way, even if you are not a home owner, while working to manage your credit card accounts through debt management, make sure you do not also ignore the rent payments. Eviction proceedings can happen even quicker than foreclosure and being evicted from your apartment has similar repercussions to credit scores - and, if needs be said, can just as severely affect your income potential and overall mind set (as we've said, a comfortably home environment should be thought of as a key to successful debt management). Also, while you are setting aside a budget for debt management and calculating how much money's available for credit card accounts, don't forget about your car payment when assessing which bills you may be able to occasionally ignore. Automobile loans tend to feature relatively lower interest rates. However, they're also very quick to repossess your vehicle if given the opportunity, and that would most assuredly hamper your continued employment as well. Debt management doesn't only refer to the elimination of credit card accounts but also a lifelong attention and organization of even those debts that you may want to maintain.
Difficulties with auto loans should be particularly worrisome for problem credit borrowers that had to involve shadier finance companies to originally afford the auto. These companies, depending on the fine print of your contract, will not even be legally required to provide written warnings before alerting their repo divisions. Much as the interest rates will be substantially lower than credit cards (which many of these businesses also offer - at sky high rates, to be sure), such predatory lenders take the risk of financing primarily in the hopes that they will be able to take advantage of the much more lucrative repossession market for your car or truck, and keeping your payments up to date should be an essential component of debt management. Another key, when assembling your budget and making a list of necessary due dates, should be to remember to always make sure auto insurance payments are on time. This shouldn't be solely because of the law, though that should be reason enough, but, in the event your vehicle insurance is canceled, the lender's have the option of forcing you to pay for their own insurance which carries with far higher premiums for limited benefit that can sink any well meaning attempts toward debt management.
It's important to recognize the varying priorities of your debts - that's the point of this article, after all - but, while the ladder of obligations must be clearly outlined, a knowledge of what you should be doing to enable your personal debt management strategy isn't nearly as important as the ability to actually undertake a successful debt management program. In this sense, added income would obviously be the most helpful to every household, but, for those borrowers that cannot reasonably hope to better their earnings on a regular basis, most every American can at least lower their outgoing expenses through a process of careful budgeting and attention to unnecessary costs. If you truly want to free yourself from the accumulated debts, there needs to be a greater overall change of life and behaviors. Take a close view of your purchasing instincts, and try to figure out ways in which you may be able to reduce the needless costs so many households develop. Above all, figure out how to exist within your budget and best determine the lifestyle that you and your family must adapt towards in order to most efficiently manage your debts. Take care to crop your household spending to the bone, and avoid attaching any further debts to your name. If it's possible for you or another member of your family to find additional earnings, whether through a second job or an at home business, that would be of an obvious benefit for debt management. Though this may not seemingly be the best time for this particular advice to succeed, you may even attempt to find a job with higher income potential or a career that would provide greater likelihood of advancement. See what you yourself can do to eliminate financial burdens. Debt management companies may be an excellent resource, but the debts remain yours and you cannot expect anyone else to sweep them away.
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