How can debt be managed and can debt counseling services help?
How can debt be managed?
The most effective way to either prevent bankruptcy or to stay out of difficulty after bankruptcy is to establish a budget to manage your affairs. This is done by determining how much money it takes to pay your basic living expenses – rent, utilities, food, clothes, medical, taxes, insurance, child support and any other required payment.
Once this amount is determined you subtract it from your net pay, or “take home” pay. The amount remaining after paying basic living expense is the amount you can afford for entertainment and payment on other debts such as car payments, furniture payments etc.
It is good advice not to charge anything on a credit card that you can’t afford to pay at the end of the month or within a few months. Credit card debt is very expensive. It also encourages you, by its very nature, to over-use it. Use of credit cards is one of the main reasons people get into financial difficulty, for all too soon you are paying only the interest and the debt never goes down.
If you seek relief in Chapter 7, you will be out of debt, but it will be essential to manage your affairs thereafter if you are to have a successful fresh start.
If you file Chapter 13, the program itself sets up a management of your affairs and allows you to consolidate your debts into that payment you can afford after first paying basic living expenses.
Can debt counseling services help?
If you need assistance in setting up terms of repayment of your debts in an orderly fashion there are several choices available to you. Some are as follows:
• Consumer Credit Counseling Services (CCCS) is an organization, basically operated by creditors, that has turnkey solutions to problems that are agreed to in advance by the creditors. The fees and costs are nominal. The problem is that not all creditors support CCCS and they are not obligated to cooperate.
• The Armed Forces and many companies operate counseling services and can often be very helpful. The services are often free.
• There are private debt counselling services that charge a fee to assist you. The problem with these companies is that they are usually not affiliated with a creditor or an employer and none of the creditors need to accept their proposal of repayment. Historically these private debt counselling services have proven to be of limited success and often at unreasonable cost to the debtor. Therefore, in selecting one of these for assistance, you should fully understand what is expected of you, the results you can expect, the time involved, and the cost to you.
• Finally, there are the provisions for relief under the bankruptcy code. Using a medical analogy, if you can cure your financial ills with an aspirin, use any of the above-mentioned agencies for relief. If you need stronger medicine such as a prescription drug or even surgery, then you need bankruptcy relief.