How To Manage Your Debts

Written by: Rudy Freeman - on July 28th, 2006

Credit cards are a wonderful tool in this economy, as long as you can control them. However, many of us just can't help it. We let them out of control and carry too much debt. When that happens, what can we do?

The first choice you have is to pay the debts yourself. It would be nice to have your debts paid without worsen your credit file. However, this is not a good option because if you can pay your debts, then it's not a problem anymore. If your credit cards still have plenty of room, you may consider transferring balances from one card to another if it lowers the interest rates. But most people don't realize the problem until their credit cards are maxed out.

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So the next choice, a more practical one, is to get help from someone such as a credit counseling service. Although it charges a service fee, a credit counseling service makes it much easier to negotiate with the creditors to lower interest rates and accept a repayment plan. Be aware that your participation in a credit counseling service will be recorded in your credit history. Some lenders consider it a negative point. Others think it's positive. However, this effect on your credit is minor compared to bankruptcy or late payments.

Another choice is to file bankruptcy. Although there're more and more people filing bankruptcy nowadays, it's not a very enjoyable option. Although the law provides you a fresh start in life, you may say good-bye to your credit for at least 7 years.

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The last choice is to run away from your debts. You do nothing and pay nothing. Of course the problem remains. The delinquency will be reported to the Credit Reporting Agencies and you can't borrow anymore before you fix the problem. Furthermore, you may find out it's not that simple. Your creditors will forward your accounts, along with your personal information to the collectors. You and your family or acquaintance may be harassed by the collectors with "threats" and many other dirty tricks. Although none of their threats are worth paying attention to, dealing with those suckers may spoil your days and ruin your life.