What to Do If You Can’t Pay Your Debt?

Do you become anxious just by answering the phone or picking up the mail because you think it might be a call from your credit card company or bank regarding your debt? You’re not the only one. Getting debt relief is a challenge for many people. The issue is that it can be very difficult to dig yourself out when your debt load becomes unmanageable.

What choices do you have, therefore, if you’re having trouble paying off your debt? First, inhale deeply. It can be quite frustrating to have debt that you don’t think you can pay off, but there are solutions available. Even while some of them—like filing for bankruptcy—aren’t very appealing, at least you have choices. Let’s talk about them:

Don’t Avoid: Stay Aware

Avoiding your financial issue is not the first step towards solving it. It’s time to open your bills if you’ve developed the bad habit of throwing them in a pile. Each and every one. List all of your debts along with the minimum amounts that must be paid. Examine your income and expenses to provide a clear and accurate picture of your current situation. You won’t be able to make the choices required to start tackling your debt until you have a clear understanding of how much debt you have and how far behind you are in terms of your ability to pay it off.

1. Talk To Your Credit Card Companies

In some circumstances, it might be preferable for a credit card company to work out a payment plan with you rather than having you default on the debt, even though it’s not ideal for them. Taking up the phone to try to negotiate credit card debt relief with your credit card provider can be worthwhile if you’re struggling with a mountain of credit card debt.

Sometimes a credit card company can be more accommodating than you anticipated, even though you might not be able to reach an agreement with them. This could include negotiating a lower interest rate, a repayment plan that works for you, or a debt settlement that allows you to pay less than the total amount you owe.

2. Dealing With Your Mortgage

You might want to think about refinancing your mortgage, either with your present lender or with a different one, if interest rates are low. Make careful to look into all of your alternatives if you choose to refinance. Additionally, you should determine if there are any options available to you to either temporarily suspend or lower your current monthly mortgage payments.

3. Get a Debt Consolidation Loan

You can pay off your debt with a debt consolidation loan, which will just require one monthly payment. The interest rate on debt consolidation loans should be lower than the interest rate on the debt you’re paying off, regardless of whether you choose to pay off all of your credit card debt or all of your debt with a debt consolidation loan. Although you will still need to make monthly payments, they should be less than the total amount owed on all of your credit cards and/or debt.

4. Dealing With Student Loans

Speak with your lender about your choices if your student loans are giving you trouble. For instance, you might be able to work out a more affordable payment schedule. The kind of debt you have will determine the possibilities you have.

5. Bankruptcy

Bankruptcy might be an option you’d want to explore if things are really bad financially. The option to resolve financial problems and in a structured manner, both for individuals, and for other cases, can happen through the Insolvency and Bankruptcy Code (IBC), 2016.

There are two primary choices for both individuals and partnership firms:

1. Insolvency Resolution Process (IRP): With the help of a resolution specialist, you can negotiate a repayment schedule with your creditors.

2. Bankruptcy Order: The court may declare bankruptcy if repayment is not feasible, which would result in the sale of assets to pay off obligations.

It’s important to consider the benefits and drawbacks before filing for bankruptcy. By restructuring or lowering your debt, bankruptcy can offer relief, but it may also have an effect on your creditworthiness. Finding the appropriate course of action can be aided by consulting a financial expert or legal counselor.

What About My Credit Score?

You should investigate how each debt relief strategy will affect your credit score when weighing your options. For instance, depending on a variety of factors, your score can slightly change if you choose to take out a debt consolidation loan. On the other side, your credit score would suffer far more if you file for bankruptcy.

Paying off your debt is your top priority when evaluating debt relief solutions, regardless of the effect on your credit score. The choice you make may have a significant impact on your credit score, but you can recover and raise it again if you continue to have solid credit practices after paying off your debt.