When experiencing a financial crisis, it is very important to act immediately and begin by contacting the creditor.
By doing so enables you to work out a temporary solution, which can help you avoid any legal action. However, it
does not always work and if so, getting in touch with your lawyer to negotiate with the creditor is helpful.

Face the Problem

The common misconception in debt problems is “the less you know, the less it hurts”. Ignoring the problem does
not make it go away. You must learn how to face your debt problems. You must be able to do this and start rebuilding
and repairing your credit rating.

Although it is not harmful to overestimate your debt, it is always beneficial to know how much money you
really owe. You can do this by taking a look at the bills you have received. In case you have thrown out your bills without even opening them, you can still call customer service and inquire about the bills.

There are several creditors that use automated telephone systems. This can provide a balance and information regarding the payments automatically. Additionally, information about your account might also be available on your creditors’ Web sites. After acquiring the necessary details, sum it all up, especially those past due installment bills and your monthly obligations.

Options Available for Your Debts

There are several options available when dealing with debts. One is to do nothing. This option is probably the most popular approach used by those who are deeply in debt. Most often, these people have very small income and property and do not normally expect any change in their lifestyle. If you do not anticipate any steady income any time soon, you can consider this option.

However, if doing nothing does not help, you can find money to pay your debts. You can do this by, first, selling a major asset, like a car or a house. This can be a good choice if you can no longer afford your car or house payments. Instead of waiting for a repossession or foreclosure to happen, selling a property is always a good option.

The proceeds you gain from the sales can help lessen your debt and enable you to pay off anything you still owe. Remember to pay off the liens placed by the creditors and use anything that is left to aid you in paying your other
debts. Before taking this step, make sure that you already have an alternative for your housing or transportation needs.

Another way, which can help you pay off your debts, is to cut your expenses. Not only will this eventually aid you in the payment but also in negotiating with your creditors. Try to shrink the cost of your food by clipping coupons, purchasing generic brands, buying when there is a sale or shopping at outlets with discounts.

If you cannot seem to cut your expenses, you can always borrow money from a tax-deferred account. Tax-deferred retirement account, like IRA or 401(k), can help pay off debts by withdrawing money from them before retirement. However, since you may need to pay a penalty or taxes, this should only serve as your last resort.

It is really important to operate within a budget so that you don’t get yourself in a financial mess. Know your income and work out what your outgoings are. If expenditure exceeds income then you need to take action on reducing your expenses. You may need to cut up your credit cards to stop the impulsive spending.