There is nothing funny about debt. Being in ‘that’ place ruins lives. Filing for bankruptcy kills your credit rating, and getting out of debt can be a minefield. The situation is compounded by the nature of the debt. For many people, it is a slow descent. For others, it is a quagmire that they may find themselves in as a result of a tax audit. However you got there and whatever the amount, you are not alone.
More than that there is a way out and there most surely is a light at the end of the tunnel. So no matter how bad you think the situation is right now, hold tight and take a deep breath. You can find a way out of this. Here are some alternatives that might help you find a way forward. Don’t let your debt drag you down.
Shine a light on your debt.
The worst thing you can do right now is to shove those bills into the drawer, or press the delete button! If your debt is to the tax authority or government most assuredly do not ignore it, no matter how unjustified you may think the demand is. Bring those figures and numbers out into the light. Count them, face up to them and understand them.
Facing up can be hard, but the truth is once these numbers are out in the light, they are just that, numbers. And seeing them, adding them up and knowing what you have to deal with means that you can do so one figure at a time. Besides, in the light, at least, you know what you are dealing with. There is less fear when you can see the enemy.
Prioritise your debts
Understand right now what debts need to be dealt with first. No one is suggesting that you ignore some and deal with only a few, but it can’t hurt to focus on the biggest and probably most urgent figures first. You also need to know how much each debt is costing you. There may be the action you can take now that can alleviate interest that is accruing.
One path of action could be to get in touch with your creditors and let them know what the situation is. Let them know that you are dealing with it and taking action. Ask to have any interest charges suspended until you can get a solution in place. You will not be the first person to ask.
Stem the Flow
Above all right now you need to stop the debt getting any worse. At this stage, it may well be worth taking advice. There are organisations who offer debt advice. Take advantage of them. It may be that they can get in touch with some of your creditors and explain the situation.
If your debt has come as a result of a tax audit or involves arrears and interest on unpaid tax, stop your sleepless nights. Get in touch with an agency who can deal directly with the tax authorities. BC Tax resolution services are well used to negotiating with the IRS and other agencies. You will get concrete no-nonsense advice and help to move forwards.
Balance the Budget
Every creditor will want to be assured that you are doing your best to resolve the situation. And for your peace of mind, you’ll want to take a close look at your income and expenses. If you have been trying to keep the ship afloat for a while, you might find that paying one hand to feed the other was making life very difficult. It is essential that you are realistic about what is left after your expenses have been subtracted from your income. The balance is what you have available to meet your debts and creditors.
You may well be able to make this figure larger by cutting back on some expenses. In other words, a little tightening of the belt is in order. Remind yourself that this will not be forever but right now you need to maximise as much income as you can.
You could release and sell assets. Be wary about compromising yourself as far as your home is concerned. But if you own your home, you may find you have some equity you can realise. Tread very carefully, the last thing you want to do is to lose your home. That may mean that you have to talk to any mortgage company, especially if you have outstanding debt regarding your home loan. Again, you need to be open and honest about the situation and see what compromise can be reached.
Fighting the biggest dragon first.
It could be that you decide or agree to pay minimum rates on some debts while focusing your repayments on one particular area. This can be a good strategy. It can be a morale boost to see one debt disappear while you focus on the next and so on. It may be possible regarding tax that you reach a compromise figure and can establish payments over a certain period. Again it is good to know that you have a debt under control.
Get rid of higher interest debts.
It will make sense to get rid of debts that are charging a higher rate of interest. Typically this applies to credit cards. It is a bad idea generally to use your credit cards to pay off other debt such as outstanding tax. Is it possible for you to transfer your credit card debt to a lower rate of interest overdraft or loan? Cut up your cards!
You might consider taking out a consolidation loan. This means wrapping up several debts into one larger figure. The advantage is that you agree to pay this off at a lower rate but at a longer period. You need to be realistic about what you can afford. However if you can do this, it will allow breathing space and may avoid a bad credit rating.
Taking a cold hard look at the facts is not going to be easy. But it is going to be better than not facing up to the situation. The truth is once you have done this, you will feel at least a great sense of relief. Talk to the agencies that can help you, wherever your debt has originated. They have seen it all before and can let you know that many people have come through this. At the end of the day, it is only money, and you are worth far more than that.