Beating the Fear That Comes with Serious Debt Problems

Not too long ago, personal debt was mostly seen as something to avoid at all costs, yet in modern society it’s almost considered the natural state of being. Most people today owe at least some money to a bank, whether through a credit card or auto finance, or through larger debts such as a mortgage or home equity loan.

For the majority of people in debt, the situation is somewhat uncomfortable and undesirable, but an accepted part of financial reality. However, for others, owing money is a real problem with severe effects that spread across all aspects of their lives.

If you’re one of these people struggling with debts, you’ll know all about the nagging feeling of dread that’s a constant undertone in your mind. You’ll be used to stressing over opening your mail in case there’s yet another nasty surprise lying in wait. You’ll jump at the sound of the telephone in case the caller is from a bank or collection agency.

In short, debt can be terrifying. But that doesn’t mean you have to simply live with this fear. Here are some positive steps to take to dig yourself out of the harrowing hole you’ve found yourself in.

Assess Your Situation

The first thing to do is acknowledge that the situation can’t continue, and that you need to be proactive in your response. This means sitting down and taking a hard look at your financial circumstances, and while this process is likely to be difficult and unpleasant, it’s an essential first step.

It may even be the case that your situation isn’t as bad as you think – debt worries have a way of feeding on themselves when not faced down – but even if the picture is grim, you need to know precisely what you’re dealing with if you’re to make any progress.

Set a Budget

A vital part of this process is to put together a basic budget, listing all your income and outgoings alongside your debts. This will probably not help your situation directly, and may even simply highlight that the figures don’t add up, but you need a base to work from. Also, the simple fact that you’re taking positive action can start to relieve your anxiety and provide a mental path forward to follow.

Deal With Small Matters

Does your newly drawn-up budget reveal any problems that could be dealt with relatively easily? Are there any obvious ways you can cut back on your spending, or any minor debts that you could work to clear first? When you’re faced with serious debt problems, it’s easy to miss simple matters which could make small but important differences to your stress levels – now is the time to deal with them if you can.

Contact Your Creditors

One of the greatest sources of fear and anxiety surrounding debt is the feeling of having no control while your creditors work against you. Although the worry this perception causes is very real, it’s not an accurate picture of the way your creditors view your problems. If you contact them and tell them honestly that you’re struggling to meet your obligations, you’ll find that the vast majority will show more understanding than you probably expected.

All creditors will want to safeguard the money you owe them, and they’ll usually be prepared to restructure your payments or delay collection proceedings once they realize that you’re not in a position to meet their standard demands.

Write to each of your creditors to inform them of your situation, and include details of your income, expenditure, and total debt levels. Ask for a payment plan to be set up to allow you to continue with at least some token level of repayment. They may or may not grant your request, but in any case you’ll have re-established some sense of control by doing this, and your actions will stand you in good stead if matters progress to any legal stage.

Seek Debt Advice

Whether or not your creditors are prepared to negotiate at first, it can be most helpful to seek the assistance of a debt counselor. They will be able to help you when securing and negotiating new payment plans, dealing with the lenders on your behalf. This can take a huge weight off your shoulders, and while it may have a serious negative impact on your credit rating, by this stage this probably doesn’t matter too much.

There are many nonprofit organizations who offer debt counseling, but waiting lists can be long. An alternative is to pay a debt management agency to handle your affairs. If you choose to go down this route, do your research carefully, and avoid any companies who promise an unrealistically easy solution to your problems. There are plenty of legitimate agencies providing a valuable service, but there are unfortunately a few cowboys too, so choose wisely.

Whether you opt for a nonprofit organisation or a paid agency, as well as relieving a large amount of stress, the repayment negotiations are likely to be more successful thanks to the counselor’s experience and lack of emotional involvement.

Consider Bankruptcy

Unfortunately, some situations are so serious that bankruptcy is the only viable solution. If you find yourself in this position, that’s no reason to give up entirely. There are different ways of entering into insolvency, and your long-term finances will be hugely impacted by the way you handle the process. Professional advice is essential at this stage to minimize the damage, but once again, doing something is almost always better than trying to ignore the problem.

Whatever You Do, Take Action

No matter how large or small your debt problems may be in comparison to other people’s, they can still cause you immense amounts of stress and worry. Although there’s not likely to be any easy solution, it’s vital to take control and begin the process of finding a way out of your difficulties. Whatever the final outcome, letting things drift on will only make your predicament – and fear – much worse.

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Liz, Financial Advisor

Liz is a financial advisor and co-founder of Direct Lending Solutions.She specialized in business and finance during her studies at Georgia State University.After a 40-year career with the federal government, she co-founded Direct Lending Solutions in 2004. Liz is passionate about matters of consumer credit and continues to contribute by sharing her financial expertise with others.

Latest posts by Liz, Financial Advisor (see all)

Liz, Financial Advisor

Liz is a financial advisor and co-founder of Direct Lending Solutions. She specialized in business and finance during her studies at Georgia State University. After a 40-year career with the federal government, she co-founded Direct Lending Solutions in 2004. Liz is passionate about matters of consumer credit and continues to contribute by sharing her financial expertise with others.