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Face the reality
The sooner you admit to yourself that you have a serious debt, the sooner will you be able to do something about it. Continuing with your habits that caused your debt in the first place, will do you no good. Stop it immediately and start thinking what can be done about it.
Deal with your anxiety/insomnia/depression
If your financial issues cause you anxiety, depression or insomnia, deal with them as quickly as possible so they don't prevent you from getting your finances in order. Check solutions for anxiety, depression, and insomnia.
Make a list of all your debts and their interest rates
Make sure you even know how much you owe, to whom, and what is the interest rate of a certain loan, credit debt or anything else. When you have a clear picture of all your debts, it will be easier for you to decide your next step.
Make a list everything you spend your money on. Food, clothing, going out, subscription, utilities, rent, everything. It will serve as a reminder that you can't continue like this, that your lifestyle is not synchronised with your earnings, and also as a tool to determine what expenses are not really that necessary.
DMP can be a great solution for you if you don't know how to deal with your debt. When you enroll in DMP, you receive free education, repayment plan, budgeting, intermediation between you and your creditors, and many other things. Check if you are eligible for DMP at credit.org.
Assess all your income and expenses. Hopefully, you will have something left after you pay for food, rent, bills, and any other expenses you cannot avoid. Everything that's left should go to debt repayment. When you know how much money you can use every month to repay your debt, you will also know how long will it take you to get rid of it and when can you start repaying your other debts, if you have them. This is good for you to know. And for your creditors as well.
You might think this doesn't need to be stated. But surprisingly, lots of people start paying off smallest debts first, regardless of the interest rate. They feel that a psychological effect of clearing your small debts in a short amount of time will help them stay on track with their debt management.
While this argument has a certain merit, you should not ignore the interest rate. You should not focus on your $500 dollar debt with 6% interest rate while your $10.000 debt with 10% interest rate keeps piling up interests. Always pay the one that has the highest interest rate, no matter how big or small it is.
Every time you decrease your total debt for $1000 (or any other amount you pick) reward yourself with a treat. It will make you feel good and give you an incentive for further debt decrease. Just make sure it's not something that will cause you even more financial issues.
If asking your bank to lower your interest rate didn't work, you might consider switching to another bank that offers better terms and lower interest rate on your overdraft. Shop around and see what other banks are offering. Just make sure there are no hidden fees.
If tackling your debt all on your own proves too difficult for you, you might want to try talking to a professional. A credit counselor can help you with managing your debt, setting up your budget, and providing you with various options.
To find a respectable counseling agency, go to justice.gov.
Debt consolidation means taking one big loan, with an interest rate as low as possible, to repay all your other loans. That way you could save lots of money due to lower interest rate and go from having to deal with several creditors, to dealing with only one creditor. Talk to you credit counselor to see if this is the best option for you.
Debt settlement is one of the last options for getting rid of your debt as it will seriously damage your credit score. But, sometimes it is the best option for you. Basically, your creditors and you agree that you will pay a certain percentage of your debt and it will count as if you repaid your entire debt.
Before using this option, talk to your credit counselor to see if this is the best option for you.
It's not the most pleasant thing to do, but it certainly beats getting a high-interest loan from a bank or credit card company. Explain your situation to your friends and family and if needed, make an official agreement, with notary public present, so the person who lends you the money knows you are serious about repaying your debt to them. If needed, offer a collateral.
While repaying your debts should be a priority, spare a certain amount (as much as you can) for your emergency fund. You never know when will you need it for medical bills or some other situation that requires lots of money right away. Otherwise, you will further increase your debt.
Chapter 7 is suitable for individual or businesses who have no other way to repay their debts except to liquidate their nonexempt property and proceed earnings to their creditors. Certain requirements have to be met for you to file for chapter 7. For more about chapter 7 and to see if you are eligible for it, visit uscourts.gov
Chapter 13 offers you a repayment plan that usually lasts from 3 to 5 years. It's suitable for individuals or small business owners who have steady incomes and are able to repay at least portion of the debt. For more information, visit uscourts.gov.