If you are reading this, more than likely you have found yourself in an unsustainable debt situation, and you may be asking yourself: How did I get here? How am I ever going to find my way out? What are my options? Or, am I just doomed to struggle to get my head above water?
Maybe you or your partner lost your job. When you lose your source of income, expenses pile up. And when that turns into long term unemployment, you can only cut back on your living expenses as much as you can. Then the only alternative left is to use your credit cards to finance your everyday expenses.
When that happens, the big waves of debt wash over you leaving you feeling like you are gasping for air every day of your life. And then comes an even bigger tidal wave of circumstance that just seems to sink your ship.
You are not alone and there is help.
You may have found yourself in an unsustainable debt situation and you don’t know what to do. Up until now you’ve handled your debt issues yourself, putting up with paralyzing stress, mounting bills and endless demand calls from creditors.
Now you need a solution.
So how do you get out of debt and what are your options? Should you consider debt settlement? How about debt consolidation? The solutions may seem confusing. Should you attempt loan modification? There are many confusing options. You need someone to help you choose the best on
1. Do Nothing
That’s right, doing nothing is an option, IF you don’t make much money, AND don’t have any valuable assets that can be liquidated. You can just ignore the debt.
With little income, little or no assets, you, as the debtor become “judgment proof.” That means the creditor has nothing to attach in your life so they have little or no recourse to collect from you.
Be careful however! Conditions in life often change. If your financial situation improves, your creditors may come after you for any unpaid debt sometime in the future when you do have money.
2. Debt Settlement & Debt Consolidation
Debt Settlement reduces the amount of your debt while debt consolidation reduces the number of creditors. The goal of both strategies is to get you, the consumer, out of debt faster and save money.
With debt settlement you owe the same creditors but you owe them less money.
Debt Warning! If you settle with a creditor or debt collector for less than the full debt amount claimed, and the difference is more than $600 the creditor/debt collector is likely to file a 1099-C with the IRS. This document reports to the IRS that your creditor has “cancelled” or “forgiven” a portion of the debt you owed.
The IRS now gets excited, and treats the amount reported on a 1099-C as income. That means you now must declare that amount reported to the IRS on your tax return and pay taxes on it.
Yup, that’s right: the creditor or debt collector sticks it to you . . . again! And the IRS helps.
3. Credit Counseling
Credit counselors can help you create a plan to effectively manage your money and help you create a debt repayment plan.
A debt management plan means that you stop paying your creditors. Instead you’ll make one payment to the debt management company and they will distribute your payment to your creditors for you.
Caution! It’s important that you choose and work with a reputable credit counseling agent. Check around. Find some people who have used them and find out their experience. Check online for possible negative problems.
There are dishonest agencies that will have you stop paying your creditors. You begin making payments to the agency. Later you find out they never turned the payments over to your creditors.
What happened? It turns out the agency took all of your money, your debts didn’t get paid, and your creditors will still come after you to collect on your debt. AND, that will leave you feeling worse than you did before.
4. Debt consolidation
Debt consolidation allows you take out one loan at a lower interest rate and pay off all of your lenders. The amount you owe stays the same but you save money because of the lower interest rate of the new consolidated loan.
Another caution here. A debt consolidation loan may leave you in debt for a longer period of time and require you to put up property such as your house or car as collateral against the loan. If you don’t make your payments you could lose your house or car. While these options save you money you are still responsible for paying your debt and neither completely erases your debt. Bankruptcy is an option that has the potential to wipe out your debt and give you a fresh financial start.
It is important to keep in mind that when you hire a credit counselor or some other debt relief agent it will cost you money. You should weigh the costs of credit counseling versus bankruptcy. Sometimes people will attempt credit counseling first only to discover their debt issues are too large and that filing bankruptcy is the best option. A reputable debt-relief firm can review your options and help you decide on the best course of action.
In Albuquerque, the Law Office of George “Dave” Giddens, P.C. has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can specifically provide advice as to bankruptcy and its alternatives.
The New Mexico firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, PC at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, PC is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.