Reducing Debt Payments Can Help You Create a Budget
While bankruptcy might seem like the way out of increasing debt
, reducing debt payments can help you avoid bankruptcy and gradually get you out of debt. However, trying to negotiate with your creditors could be challenging. You may want to utilise the services of a professional debt manager.
Debt counsellors are experienced at debt reduction negotiations. Creditors are used to dealing with debt counsellors and understand that if you've spent the time and money necessary to hire a money management team then you're serious about paying off the debt, even if you can only do it in small increments. Another perk of working with a debt counsellor is that they can create a budget that helps you pay off your debts each month.
Why Not Choose Bankruptcy?
Bankruptcy is often advertised as an easy fix for debt problems. Bankruptcy attorneys advertise that once you file you'll be free of all your debt and able to start over with a clean slate. However, bankruptcy should be looked at as a last resort. The only people who should even consider filing bankruptcy are those with debts so large a financial manager can't even negotiate reduced payments, or the reduced payments are still too large of a sum to pay off each month. Anyone else should consider reducing debt payments over bankruptcy, because bankruptcy destroys your financial reputation.
When you file for bankruptcy your credit record is immediately impacted. It will be next to impossible for you to finance a large purchase such as a house or car for many years. Creditors won't approve loan or credit card applications, and you may find that if you don't have the cash, you won't be making the purchase. So if your debt problems stem from a temporary setback such as the loss of a job or a large amount of medical bills, find out how you can reduce your payments before filing for bankruptcy. This way, you can still be approved for credit or make a financed purchase after you get out of debt.
Creating a Budget
Your debt counsellor will help you create a budget that takes into consideration all of the income available to you each month for your debts. One reason many people go into debt is because they fail to budget or don't understand how to create a proper budget. A financial manager can create one budget to help you pay off your debts and another budget that shows you how to start saving money once your debts are repaid. Counsellors help by not only reducing debt payments, but by helping you change your financial future.
Reducing Debt Payments Can Help You Create a Budget
By: Chris Jenkinson
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