So, how does a person know if they have a debt problem? I see people who are making the minimum monthly payments on tens of thousands in credit cards, often borrowing from one card to pay another, and yet they boast about their high credit rating and flash designer handbags.
But they are robbing Peter to pay Paul and cannot buy necessities like food and gas each month without using credit cards. A good credit rating (or good clothes) does not mean much if you can’t sleep at night.
When you cannot pay your bills or you are paying a minimum and making no visible forward progress, you need to consider all your options: This may mean cutting back on expenses like cable and cell phones or even moving to a smaller house or apartment, giving up an expensive vehicle, getting a second job, or maybe bankruptcy. It may mean saying “no” to your kids and looking at modifying your lifestyle. It may mean making a conscience decision to not keep up with the Jones. Debt does not have a “one size fits all” solution.
Sometimes you’ve cut to the bone and it is not enough. So, whom can you turn to for help and to look at all the options?
Because many people are embarrassed by debt, they often turn to companies promoting debt settlements or debt consolidation on the late-night TV commercials. The sales pitch sounds great: No one has to know and you can send your money to this nice lady in (pick a state or country far, far away) and she will take care of your bills and make all those mean creditors leave you alone. But, keep in mind, these companies are only negotiating on your behalf and the law still favors the creditors’ rights.
Debt settlement companies seek to settle your debts for a percentage of what you owe. But you have to come up with the funds to settle and there can be a tax consequence at the end of the year. The Federal Trade Commission and the Better Business Bureau warn consumers to tread carefully and watch for red flags of companies promising results they cannot deliver. Many consumers have lost thousands of dollars due to deceptive advertising and business practices from these companies in the past four years.
Many of these debt settlement programs don’t work and often leave consumers holding an empty wallet and still owing the original debt and more. While the Federal Trade Commission has passed new rules to crack down on these companies, they still entice many folks. Why is it we will go to the doctor when we are sick, but we don’t want to go to a legal professional about financial illness?
Debt consolidation companies seek to work with your creditors to reduce or eliminate interest and arrange a payback schedule from three to five years. I regularly recommend Consumer Credit Counseling, a non-profit community organization here in Roanoke, for some prospective clients for debt consolidation or budgeting classes. And Consumer Credit regularly recommends some folks file bankruptcy when they recognize there simply is not enough money available to pay back debts.
Recognizing that a debt issue exists is the first step to getting help. The second is to seek help from someone you trust. If faced with real debt issues, ask close friends, family, or your preacher if they know of someone to whom to talk about the problem. (You might be surprised to learn they have had difficulty also in this economy.) Ask for referrals from people you know and go to someone who can give you common sense practical advice, combined with knowing your options. If you had a lawyer who helped you in the past with other legal issues, call him or her and ask for a referral.
Once you recognize a debt issue exists, look fully at all your options. Anyone contemplating debt settlement or consolidation should also consider bankruptcy, where the laws shift to favor the individual who owes the money – not the creditor. Considering all your options is the only way you can find the solution that is best for your personal situation.
Folks have debts due to a huge variety of reasons. Yes, some may have overspent. Others were caught without medical insurance, or lost a job, or suffered through a divorce. In this economy, many small businesses have failed due to no fault of their own. But no matter the reason, stuffing the bills in the back drawer will not make them go away. Debt issues are real and there is help that can solve the problem.
Malissa Giles received the Platinum ranking as top attorney in Roanoke Valley as recognized by readers of The Roanoker in 2012 Best of Roanoke. (May/June 2012 issue.) You can reach her at 981-9000 or [email protected].
