I Am Under a Mountain of Debt, What Are My Options?
If you find yourself walking around with a 500 pound gorilla on your back named DEBT, then you might be wondering if there are, in fact, any real options for you. Well the answer to that is: it depends. There is always an “it depends” clause somewhere right? Yeah, but the reason is that your exact situation dictates your options.
Some people have no money, no job, and are in debt up to their eyeballs. This person’s situation is much different than someone that has plenty of money, a good job, but doesn’t pay his bills so he has terrible credit, and now that his credit is shot, he thinks paying his bills is a waste because it won’t improve his situation. Yes, people get themselves into positions like that all the time.
First thing you need to do is create a balance sheet, which is just a two column table with INCOME on the left and EXPENSES on the right. List everything you pay money for on a regular basis. Round up things like food and other consumables, you round up because it is better to overestimate expenses than to overestimate income. If you have extra money after all this every month, then you should use a portion of that money for paying debt. Even if it is just $20.00 a month, it is still something. The important thing is to get into the habit of paying your debts regularly and you’ll be surprised how quickly the time goes.
Instead of paying your debts, you can always declare bankruptcy. There are two classes of bankruptcy, they are Chapter 7 and Chapter 13. The difference is that Chapter 13 is better and lets you keep certain assets that are exempt from liquidation, provided that you have a steady income. These include assets such as a house (mortgage) and a car, etc. Chapter 7 is much more strict and makes you liquidate nearly everything you own. The federal system encourages people to file Chapter 13 because the economy would be better off in the long run. Filing bankruptcy will stay on your credit report for 10 years, and will make it difficult to get credit. This is why it should be used as a last resort only.
