If you have run up substantial debt and are now unable to make the monthly payments, there is little to be gained by running away from the situation. When creditors chase you they usually try to assess your financial circumstances and the extent of your resources so that they can collect the maximum amount as soon as possible. However, as may be expected, each debt collector is only interested in his own account and want to know nothing about other debtor’s claims. In the event you have a number of debtors, it is imperative that you formulate a strategy that will enable you to negotiate with them effectively. It is essential that you align your repayment options with your ability to access finance.
Assess Your Financial Situation
It is important that you know the reason why you have a debt servicing problem. Maybe it was an increase in your expenses or maybe you suffered an income loss or maybe it was a combination of both. Are you earning less than your income or more? Then what is the shortfall or the monthly excess? It is also important for you to know the value of your assets and other resources that you may have access to. You should also be aware of how much of your debt is secured and how much is unsecured. Can you figure out if you will be able to survive if you liquidate all your resources to pay off the debt? Answering these questions in as much detail as possible will only serve to make you aware of your financial status and formulate an effective strategy for communication with your debtors and achieve your financial goals.
Explain Your Story
It is vital that you get together a story of how you got into the financial mess that you are in. Compile and list all the life-changing events, preferably chronologically, so that you can make your debt collectors appreciate the situation. In case your income is less than your monthly expenses, be sure to point it out explicitly so that they appreciate your circumstances more. Get into as much detail as possible, especially if you have other accounts that are delinquent as well so that your plea for debt relief is more plausible.
It is a good idea not to share details of your financial and other assets. If asked for details of your employment, refuse to divulge anything on the grounds that your income could be jeopardized. Keeping your work details confidential helps prevent them taking any action that could lead to wage garnishment. Be careful what details you share on social media platforms as debt collectors are getting increasingly savvy too. There is no way that they can get to know about your non-public accounts like bank details, insurance, certificates of deposit, 401k’s,stocks, mutual funds, etc. if you do not divulge it to them, either in your original application or later.
Make a Debt Resolution Plan
By now you would have assessed all your financial resources as this is important for you to evaluate your options. If your assets can raise around half of what you owe in total debt, then it could make sense for you to consider liquidating them and settling your outstanding debt by enrolling into a debt settlement program. You need to be cautious while calculating the potential value of these assets as overestimating them could lead to disappointment.
The best way to avoid filing for bankruptcy is to ask your creditors about hardship programs that are generally not offered unless your debt repayment is between 30 and 90 days old. If you are given an opportunity to participate in a hardship program, you can get the benefit of lower rates of interest and a reduced monthly payment. Enter into a hardship program only if you are comfortable with the terms and you can sustain it over the period being agreed upon.
Author bio: Cheryl Peltz is a senior debt collector working for a prominent credit card issuer. Being a keen marine photographer, she likes nothing better than exploring tropical seas in the Caribbean.