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Have You Done Enough to Resolve Your Debt Problem?

Debt Problem
Debt can build up slowly with a credit card bill that continues to increase or a student debt balance that never seems to drop. Other times, debt takes over instantly with an unexpected job loss or a medical emergency. Either way, daily life may seem impossible once your expenses surpass your income.
Overwhelming debt is more than a financial problem. It can become a social and health issue as well. People with financial problems lose sleep and go into depression. Sadly, overdue bills, collection notices, and potential foreclosures will not go away on their own. Everyone must do all they can to correct their financial problems.
Have you done enough to resolves your debt problems? Use the following tips to help you get back on track.
Recognize the Reality
Many people in a financial crisis ignore their phone calls and refuse to open their mail. Some simply send minimum payments or a part of the amount due and hope it will silence the creditor for a few weeks. But you can easily make mistakes if you try to ignore your financial situation.
You should avoid mistakes that make debt grow larger. If you are suffering from debt, you should have a clear list of what you owe in total, what you owe per month, and how your monthly income compares. You can find solutions only if you are organized and honest to yourself about the challenge you face.  
Talk to Experts
Visit a non-profit that offers financial advice. The National Foundation for Credit Counseling is a free service that offers a variety of debt counseling services in offices around the country. Local groups and online services can also help people to learn how to budget better and to find ways to address their own personal spending concerns if needed.
Consider Debt Consolidation
Debt consolidation through a loan or with the help of the funds in a 401k will not make debt disappear. The loans make it possible to lower interest rates for a smaller monthly payment or help to pay off debt sooner. But you may not get approval for a loan when you are already behind on bills or your credit score has dropped due to delinquent payments.
A loan from a 401k may be more feasible to some, but it is not a good idea for everyone. If you are close to retirement, it could be risky to take money away from your retirement account. Also, you could still struggle to pay back the loan, and non-payment will result in a large tax bill and possibly an early withdrawal penalty.
Contact Your Creditors
You likely want to avoid creditors when you can’t pay a bill, but the lack of communication will not make the problem go away. Some creditors will not negotiate and prefer to send the account to the collections department. However, many creditors are happy to work with their clients to lower rates, extend the terms of a loan, or to settle the amount.
Make Some Changes
Anyone in debt must accept the fact that they must earn more and spend less. Consider getting a second job or doing freelance work, or you can ask your employer if you could work overtime. Sell unnecessary items and use the proceeds to pay down debt or to save more money. You could also buy groceries in bulk or pay an insurance policy upfront and avoid processing fees.
Create a tight budget and follow it. One of the biggest expenses Americans can make is on food. The USDA estimates that a family of four should only spend $195 per week on a low-cost grocery plan, or $148 each week on a thrifty plan. Try not to exceed these numbers and eliminate all fast food, dining out, and morning drive-thru coffee stops.   
Sometimes the debt accumulates too fast or people wait too long to address the problem. Not all issues problems have a simple resolution. In some situations, bankruptcy may be the only option. At Michelson Law Office, we work with you to find the best solution that will let you have peace again. Contact us to learn more.