Solutions For Bad Debt Problems

solutions for bad debt problems

Perhaps the title of this article is a bit of a misnomer. After all, is there such a thing as a good debt problem? Of course, some are worse than others, which is why there exists a variety of methodologies by which you can get them straightened out. 

So here, without further ado, are some good solutions for bad debt problems. 

Attack Them On Your Own 

There are a number of ways to accomplish this, all of which begin with taking stock of your financial situation so you can see where you really are. Simply put, you’ll need to develop a monthly spending plan to ensure your cash is being put to best use. 

Pull together a list of all of your monthly expenses, including your rent/mortgage payment, utilities, food, clothes, utilities, credit card payments and the like. Total them up and compare the sum to your monthly income. You’ll probably just need to move a few things around if the former is less than the latter, 

However, you’re going to need to cut back in some areas and/or earn more money if the former is greater than the latter. You might also consider doing a credit card consolidation to help make those payments more manageable. 

The snowball method of debt reduction is another effective strategy to pursue as well. 

Credit Counseling 

There are people out there who will help you review your income and expenses to find ways to manage your debt more effectively. Credit counselors provide free workshops and materials to help you master the fine art of running your personal finances. 

You do have to be careful to find reputable people though. There are bad actors out there looking to take advantage of your situation. 

Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. If things look really tough, credit counselors will usually recommend debt management, which we’ll discuss in more detail shortly. 

Debt Consolidation 

The aforementioned credit card consolidation can be accomplished in several different ways. With a good credit score, you can apply for a personal loan, a home equity line of credit — or refinance a property and use the proceeds to encompass your outstanding debt. 

Credit management is a good consolidation approach for those whose credit histories may have suffered because of debt problems. A credit counselor will negotiate fee waivers and interest reductions to make those debts easier to repay. You’ll send money 2 to the counselor every month — who will disburse it according to the agreements they’ve reached with your creditors. 

Debt Settlement 

In a manner similar to that of the debt management stratagem, debt settlement agents communicate with your creditors to negotiate more favorable repayment terms. However, they’ll also ask for reductions in the principal balance in exchange for providing a single payment in full to settle the account. 

It’s important to note this only works for certain types of unsecured debt. Mortgages, car loans and other debts secured by an interest in property or a financial instrument are excluded. Federal student loans aren’t eligible for settlement either. 

Once an agreement is reached, you’ll deposit money into a fund from which the settlement payments will be made as the balance of the account permits. While this can be a good way to deal with debt problems; it does mean your credit score will dip. However, your score has probably already dipped if you need debt settlement. 

Bankruptcy Protection 

If all else fails, you can avail yourself of debt relief through the bankruptcy courts. Here again though, this is only effective at discharging unsecured debt. Student loans, child support and alimony payments won’t go away. 

Ditch Your Debt

These are the leading solutions for bad debt problems. One of these is likely to be the answer you’re seeking, whatever your issue and/or circumstance.