3 Tips on How to Gain Better Financial Stability
April 12, 2022
It’s quite common for people to find it difficult to admit that they are in a financial crisis. Every person makes mistakes in life — but in the area of personal finances, it can be easy to consider the situation to be “temporary.” Eventually, savings are gone, bills are mounting, and the constant calls of creditors foster a mindset of procrastination and avoidance.
Untangling your finances can be a huge headache, but it doesn’t have to be. Below are a few tips that should be discussed with an experienced bankruptcy attorney. This can bring real solutions to your current problems and start the process of stabilizing your finances and improving your future.
Tip 1 — Consider Bankruptcy
Bankruptcy is the legal process that helps individuals or businesses get rid of their debts and repay their creditors. Bankruptcy provides relief for people who are unable to pay their debts. Listed below are some of the advantages and disadvantages that bankruptcy can provide.
Advantages of Filing for Bankruptcy
Filing for bankruptcy will trigger an automatic stay. The automatic stay stops creditors from taking action to collect their debts and stops creditors from repossessing property such as cars and other personal property. It can also prevent your creditors from contacting you or taking legal action.
Filing for bankruptcy can put a stop to attempts of eviction, foreclosure, wage garnishment, and shutting off electricity or water services.
Most people who file for bankruptcy find relief knowing that they will have a fresh start. While it may not seem like an advantage, bankruptcy allows for reset and a feeling of being set free.
Disadvantages of Filing for Bankruptcy
Some of your assets could be seized by the court and sold off to pay creditors.
Your bankruptcy can appear on your credit history for 7-10 years.
Initially, bankruptcy might have a negative mental impact and create feelings of failure and embarrassment.
Many people buy into the myth that bankruptcy is all bad and only focus on the feelings of failure and embarrassment. In reality, filing for bankruptcy is not as devastating as people often think. If your finances have become unmanageable because of divorce, illness, job loss, or anything else, filing bankruptcy may provide the financial reset that you need.
Tip 2 — Consider Debt Settlement
Also known as debt negotiation, debt settlement is negotiating with creditors to settle debts, often for less than the amount owed. If the creditor accepts the settlement, you’ll typically have to make a lump-sum payment to resolve the debt.
In some situations, a settlement could be a helpful option to take control of your debt. It is important to be aware of the advantages and disadvantages when negotiating and settling debts.
Advantages of Debt Settlement
Your debts may be settled for less. A creditor may agree to a settlement that is significantly less than the actual amount owed, including waiving fees or interest charges.
Settling can allow you to pay off your balance altogether rather than spending months or years doing so.
Negotiating a successful settlement might provide you with the financial breathing room you need to avoid bankruptcy.
Disadvantages of Debt Settlement
Your creditors might not be willing to negotiate. There is no guarantee that your creditors will accept your settlement offer.
Fees could be attached to the settlement. For-profit debt settlement companies typically charge fees for their services — usually 20% to 25% of the final settlement amount.
Your credit can be impacted. Resolving a debt for less than what you actually owe could have a negative impact on your credit.
The pros and cons of debt settlement vary, especially with regard to the amount of time it will take to eliminate debts and the impact it will have on your credit score. When used properly and with the guidance of a knowledgeable bankruptcy attorney, it can be an effective debt elimination strategy.
Tip 3 — Consider Debt Consolidation
A final tip to stabilize your finances is to consider consolidating your debts. Debt Consolidation is the process where a single loan is used to pay off multiple loans. This allows for a single monthly payment rather than multiple payments to different creditors. Though it may sound like a perfect solution for everyone, remember both the advantages and disadvantages.
Advantages of Debt Consolidation
Your interest rate may be lowered. The most significant advantage of debt consolidation is paying off your debt at a lower interest rate.
You’ll have just one monthly payment. Instead of tracking multiple monthly payments and different interest rates, consolidation allows you to combine all of your debt into one payment with a fixed interest rate.
Your credit can improve. If payments are made on time and in full, the net effect should have a positive impact on your credit score.
Disadvantages of Debt Consolidation
There is no guarantee of a lower interest rate. Balance transfer cards or consolidated loans can be hard to qualify for and typically require good to excellent credit.
Falling behind on payments can lead to a worse financial position.
The root of the financial issues has not been dealt with. Though consolidation is a useful tool, it is not a simple fix for recurring problems and will not address any bad habits that led to your debt.
Gain Better Financial Stability
If you are in financial trouble, there are options. Even though there is no magic wand to erase your financial problems, working with an experienced bankruptcy attorney can create a new path to financial stability.
The Law Offices of David K. Blazek, P.C. serves clients in Tampa, Florida, as well as the neighboring areas of Miami, Jacksonville, and Orlando. They are an exceptional resource for individuals and businesses interested in pursuing financial stability. Bad things may happen to good people in life, but there is no reason to avoid tackling your debt issue head-on. Call today.