When overburdened by debt, it is easy to begin to feel hopeless and stuck. Many money savvy people take on too much debt and may even get behind in their payments. It is not uncommon for even the most financially sound individual to fall on hard times in this economy, leaving them without the ability to pay their bills on time. When faced with creditors, notice of delinquent accounts and threats of foreclosure, it can seem like there aren’t many options left. Fortunately, there are ways to get out of a bad situation.
Creditors Are Calling
Did you know that you have the right to negotiate with your credit card company? In many cases, a credit card negotiation can arrange modified payment terms to your line of credit. You may be able to obtain a reduced interest rate, get an extension on your payments or have your delinquency fees waived. Some companies may even agree to negotiate a lower principal amount of your debt to be repaid. In other words, you may be able to “settle” your debts for less than you actually owe. However, credit card negotiations can be tricky and having legal representation throughout the process can help you get the best deal.
If you are unable to obtain an adequate agreement through a negotiation with your creditor, seeking debt relief through bankruptcy is another option. A Chapter 13 bankruptcy can provide more leverage when it comes to negotiating a repayment plan with creditors. Typically, you will be able to develop a repayment plan that better suits your budget and be allowed to repay your debts in three to five years. Once the bankruptcy court approves the plan, your creditors must comply with the plan. Filing for bankruptcy will also cease all collection efforts through the issue of an automatic stay. If you cannot afford to repay your debts, you may be eligible for debt elimination through Chapter 7 bankruptcy.
Mortgage Lender Is Unhappy
As in credit card negotiations, you also have the right to request a mortgage loan modification from your lender. A mortgage modification can change the terms of your existing loan, or allow you to obtain a new loan with more favorable terms. Changes to your existing loan include reduced interest rates, extension on the life of the loan, reduced principal amount of the loan and a temporary suspension of payments. Contact your lender right away if you think you may miss a mortgage payment.
If you are unable to reach a suitable mortgage modification, bankruptcy can protect your home from foreclosure. In many cases, you can develop a plan to get caught up on your mortgage payments, while keeping your home. Each state has different bankruptcy exemption laws that dictate whether you are able to keep your property indefinitely through bankruptcy. If you are seeking bankruptcy protection, it is best to obtain an experienced bankruptcy attorney to guide you through the process.