How To Handle Debt Issues – Beyond Consolidation
How To Handle Debt When Consolidation Isn't Available
If your debt is getting out of hand, or if you've been struggling just to get by, it is important that you take action fast.
In this piece, we'll go through the basic steps you can take to limit your stress, get your financial life back in order, and understand what your rights are if a lender takes legal action against you.
- Talk to Your Credit Provider
- Apply for a Hardship Program
- Look for Help if You're Having Issues with Debt
- What to Do if a Lender Takes You to Court
Talk to Your Credit Provider
If you find that you're having issues keeping up with your utility bills, loan payments, or paying your credit card bills, the first step you should take is to tell the creditor that you're struggling. Taking action fast may help you keep a fairly small problem from becoming a major issue.
Many types of companies have departments who handle creditors with financial hardships, and they may be able to assess your situation and help you determine if help is available. Their ability to help you may depend on the reason that you are struggling to make your payment, as well as how long you think that difficulties will continue.
Hardship professionals may also be able to help you work out a more affordable payment plan, like adjusting the number of your loan payments or paying a bill in installments.
Apply for a Hardship Program
If you find that you are unable to keep up with your payments on a loan or credit card, due to an issue such as severe illness, unemployment, or financial circumstances dramatically changing, it may be wise to investigate financial hardship programs.
There may be different thresholds depending on the type of debt you owe. Contact the lender or creditor in writing or by phone. Try to get in touch with their hardship department, or speak to customer service representatives and then ask for someone who specializes in this.
Provide them with the information they request about your account and the amount you owe.
Ask if you can change the amount you owe each month because you are experiencing financial hardship, and explain the reasons to them as clearly as you can.
Be ready to speak to them about the reasons you are having trouble making payments, how much you can afford to pay each month, and how long you expect your financial difficulty to last.
Sample Hardship Communication
You can find sample hardship letters here if you plan to send the information by mail. These templates will help you include the correct information as you reach out to the companies you owe money to.
How Long Will it Take the Lender to Answer?
If you contact a lender about a hardship program, you can expect that it may take awhile for them to contact you, although the specific length of time may vary from one lender to another.
If you don't hear anything after several weeks, contact them again, and keep records of all correspondences.
How Can You Adjust Your Repayment Amount
Options that you may want to discuss with your lender include:
- Extending the period of your loan, so that you are making smaller monthly payments for a longer period of time.
- Postponing your repayments for a specific amount of time.
- Extending your loan period and postponing your repayments.
As you work to negotiate a repayment plan, be sure that it's one you can afford. There's no point in agreeing to an amount that you won't be able to pay each month.
If you determine that you're unable to make the payments on the new agreement, contact your lender immediately. Continue to pay as much as you are able to pay, even if it isn't the amount that the lender is asking you for.
Consider a Complaint
It's in your credit providers best interest to work out a repayment plan with you. If you attempt to work out a new plan and are unhappy with the result, you can ask to speak to their complaint department and file an official complaint.
Look for Help if You're Having Issues with Debt
You don't have to struggle alone. Often, you can obtain low cost, private help to assist you as you get a clearer picture of your situation.
Financial Counseling: Some community legal services, government agencies, and private organizations offer this service. Check with your local banks and libraries to determine what is offered in your area - Learn more here.
Legal Advice: Contact your local Legal Aid branch for legal advice about working with lenders.
If any of your financial problems are being caused by another individual running up debt in your name, pressuring you to spend money, or pushing you to cosign for a loan, it's possible that you're experiencing financial abuse. Learn about financial abuse here, as well as how to seek out help.
If you are being intimidated or threatened by someone that is trying to collect a debt, there are things you can do to stop their threatening behavior. Educate yourself about dealing with debt collectors so you know what they are legally allowed to do, and not do, in your situation.
Debt Management Companies
It may seem like a great idea to pay someone to quickly fix your credit, but credit repair companies or debt solution companies may not always be what they seem. Be sure to thoroughly research any company of this type that you are considering with the Better Business Bureau.
What to Do if a Lender Takes You to Court
If you've received a notice that you will be taken to court over a debt, it's important to act quickly.
First, decide if you agree that you even owe the debt.
You have the option to agree that you owe it, or to dispute it. Legally, you may not have to pay it if it is an old debt.
Offer to Pay in Installments
If you are in agreement that you owe the debt, but cannot pay it off in one lump sum, ask the lender if they will allow you to pay in an installment plan.
Alternatively, you can go to court and ask the judge to rule that you pay the debt in installments.
Keep Making Payments
If you are able to, and especially if your debt involves repayments on your home loan, keep making repayments. Even if they are smaller or less frequent, they can help keep the situation from getting worse.
A lender has to go through a number of steps before they can access your bank accounts, garnish your wages, or repossess your home, so don't panic immediately.
Case Study: Peg Gets Help with Debt
Peg is in her sixties and has a chronic illness, so she is only able to work part-time.
She has two credit cards from the same lender, and both are at their max. One card has a limit of $5,000. The other card's credit limit has grown from $3,000 to $20,000, as she has agreed to each offer the company has made to increase her limit.
As her health worsens, she cannot work and has fallen behind on her debt repayments. The lender begins legal action against her. Because she has no assets to sell, she feels that the only way she can pay the lender is to sell her house.
A legal aid attorney helps her prepare her case and works with her for court. Peg's complaint is that the creditor did not consider her ability to repay before continually offering her credit.
The court rules that she can keep her home and pay off a reduced debt of $10,000 in monthly payments.
Financial issues are extremely stressful, but help is available. Take the first steps now by talking to your creditors and figuring out a plan to get back on track.