Knee Deep in Debt

Written By Ellise Walsh

Tue 3/29/2005 11:04 AM

 

Only a few generations ago, consumer debt was a relative rarity. Our parents and grandparents generation was reluctant to take on debt. For many people in their generation, the only debt was their mortgage, and even that was entered into reluctantly and paid off as quickly as possible.

A quick look around indicates that world is gone. Consumers today are no longer reluctant to incur debt, even for everyday needs like food and rent. And where in the past, our parents and grandparents were already successful working adults before they incurred the debt of a mortgage, today�s consumers start using credit cards while in college, or even high school.

While the ready availability of revolving credit helps people to acquire the consumer goods they want and helps keep the economy humming along, it does exact a heavy toll on those who fall behind on their debt payments. It is no coincidence that the increase in bankruptcy filings has closely tracked the increase in levels of consumer debt.

There is no question that being knee deep in debt puts consumers at risk. Having a high debt load means that even a temporary financial setback, like unexpected car repairs, uncovered medical expenses or a job loss can spiral out of control and leave you unable to pay your bills.

There are things consumers can do, however, to climb out of their financial hole and get back on solid financial footing. Whether you do it yourself or seek the help of a debt counseling service will depend in large part on the amount of your debt and your confidence in financial matters.

Many consumers wrongly think that they must turn to a professional for help with their debt. What they don�t know is that there are steps consumers can take to negotiate directly with their creditors. Banks and credit card companies are often willing to negotiate a better deal to help ensure the consumer can pay off what he or she owes. After all, if the consumer is forced into bankruptcy court, it may be difficult or even impossible for the creditor to recover what is owed. Do not assume your creditors will not negotiate. They don�t advertise the fact, but they are often willing to significantly lower interest rates, waive late fees and over limit charges and even accept a lesser amount than the full amount owed.

Of course if you feel uncomfortable with this process, there are a great many companies willing to do the work for you. Credit counseling services and debt management firms operate in every major market, and they can be quite good at negotiating with creditors on your behalf.

The best credit counselors will not only help you manage and eliminate your current debt, however. The good operators in this market will offer extensive credit counseling services to teach their clients how to effectively manage their money in the future. You should definitely look for these services when seeking help with your debt. After all, it will do you no good at all to get out of debt on month, only to plunge right back in the next. Retiring your current debt is only part of the solution. The long term solution is to learn how to manage your money for the rest of your life.