Does it seem like the only news you hear about your personal finances is bad and worse? You’ve slipped into a hole; creditors are calling; you don’t see a viable way out.
But — for one reason or another — you don’t qualify for bankruptcy.
Maybe you fail the means test: Your income is too high compared to your debts, or you have too many assets that could be tapped to pay off the debt.
Maybe, for all your money woes, you lack sufficient debt to interest a bankruptcy lawyer.
Maybe, on top of all that, you’re too broke to muster the filing fee.
Take heart. There are options and strategies that could yet get you turned around. For real.
Implement Anti-Harassment Laws
First, look for ways to reduce the psychological pressure. (Emotional relief is one of the top immediate benefits of filing bankruptcy … but you don’t qualify.)
Clearly, creditors have a job to do. But they don’t get to be ugly about it. The federal Fair Debt Collections Practices Act, undergirded by certain state laws, protects consumers from abusive and harassing behavior from debt collectors.
Among the things they’re prevented by law from doing:
- Come to your workplace. Your debts cannot be publicized, so turning up at your office is a no-no.
- Harassment: repeated calls, threats of violence, abusive/obscene language, publishing information about you.
- Call whenever they please. This is sort of a harassment subset: No calls before 8 a.m. or after 9 p.m. Also, you can tell a debt collector to stop calling and/or writing about attempts to collect and they must stop. (This does not affect the amount owed.)
- Press you for debts you don’t owe. Hey, it happens. Incomplete or erroneous information can prompt a debt collector to chase you for a debt when actually it’s someone with a similar name, or it’s for a debt you already paid. It’s illegal, but it’s not uncommon.
- Arrest you. This is not the 19th century. Most of the time. However, if you’re sued for a debt and fail to show for your court date, you could lose by default. If you defy the court’s order to pay, then you’ve triggered a process that could lead you to jail.
Attempt to Negotiate Better Terms
Lenders holding unsecured debt want most of all to be paid back. They are not beyond renegotiating the interest you’re paying on your balances, but you have to ask.
Here’s how to prepare to negotiate better debt repayment terms:
- Know your card(s) and/or loan(s) provisions, including the grace period, monthly due date and your balance(s). Check your credit ahead of time; if you’re still wielding a decent score indicating you’re a good risk, lenders might be more inclined to comply with your requests.
- Do your homework. Are there competing credit cards with better rates? Note them and be prepared to invoke their attractive terms as a bargaining lever.
This is not a guarantee, of course, but if you can properly explain your current financial fix (be ready to document your struggle, and explain whether your budget crunch is temporary or long term) and agree to a repayment schedule — make certain it’s realistic — the bank might cut you a provisional break on your interest.
Understand that if you get a reduction but fail to keep up your end of the bargain, those high rates you bargained down are likely to snap back, and then some.
Increase Your Income
Easy for us to say, right? Snap of the fingers. Voila: Mo’ money.
Actually, anymore it’s not a whole lot more complicated than that. We live in an age where anyone with a bit of spare time, a smartphone and maybe a Wi-Fi connected laptop, plus some old-fashioned want-to, can add routinely and substantially to their income.
The gig economy is everywhere, and available to almost anyone, regardless of skills. Have clean, reliable, late-model transportation? Drive for one of the ride-sharing companies such as Uber or Lyft. Have reliable transportation and the ability to follow directions efficiently? Sign on with one of the home-delivery services, such as InstaCart, DoorDash, Grubhub or Uber Eats.
Got skills as a writer or editor? How about programming or marketing? Can you tutor? Do you have specialized expertise that might qualify you to do part-time consulting? The trend in the freelance economy is toward knowledge-intensive and creative occupations.
Get started by checking out the opportunities listed by freelance jobs websites, such as Flexjobs, SolidGigs, Fiverr, Upwork, CloudPeeps, Freelancer and/or Indeed.
Also worth looking into: Maybe you deserve a raise at your day job. The labor market is tight, and there’s upward pressure on compensation. If you haven’t had a boost lately, do some homework: What are others with your skills and experience being paid for similar work in your marketplace? Your research might indicate you’re due a bump; if so, talk it over with your supervisor.
Squeeze Your Budget to Cut Out Excess Spending
If you have a budget, great. Now, reexamine it. See if there are efficiencies available.
If you don’t have a budget, well. We might be onto a clue about your financial fix. Time for a hard look at what’s coming in, and where your money goes.
Examine your spending. Find where you’re leaking money on unnecessary expenditures. Everybody points out lattes and eating out and going to movies on opening night and resetting your thermostat and pumping mid-grade gas instead of premium, and we’d be remiss if we didn’t join the chorus: If you’re in so much trouble you’d like to declare bankruptcy (but can’t), eliminate the low-hanging fruit in your budget immediately.
Consider assembling budgeting tools: a spreadsheet, a journal, and, naturally, apps. Some apps and platforms perform automated tracking and categorizing, and deliver alerts when you overspend.
Do you have subscriptions for services you don’t use or underutilize or even don’t like? Are they on autopilot — they’re paid (or charged) and renewed automatically? There are apps and platforms for curbing that spending, too, among them Trim, Truebill, Prosper Daily, HiatusApp, ClarityMoney.
Is Debt Settlement for You?
When you’re desperate, those commercials about having the “right” to settle your credit card debt for about half of what you owe sure sound attractive. Especially when the announcer adds that part about your lender wanting to keep that information from you. Those so-and-so’s.
Well. There are rights and there are gambits. Debt settlement, which risks wrecking your credit every bit as much as bankruptcy, falls into the latter category.
For a hefty fee — up to 25% of the amount owed — debt settlement companies instruct consumers to stop making payments to lenders holding unsecured debt — credit cards, medical bills, personal loans — and instead start funding a savings account. When the fund reaches about half the amount of the debt owed on an account, the company attempts to negotiate a settlement with the creditor.
Meanwhile, debt collection efforts continue; interest causes balances to swell; and the consumer’s credit score slips southward.
Also, if you owe less than $10,000 overall, debt settlement companies generally aren’t interested.
Consider Debt Management
If some of the suggestions above sound intriguing — Who wouldn’t like lower interest rates, or ending calls from creditors? — but you lack the time or energy or, frankly, gumption to take on creditors yourself (and there’s nothing wrong with being thwarted by any combination of these obstacles), debt management might be just the ticket.
Explore your options with nonprofit credit counseling agencies. Pop the phrase into your preferred search engine, and go. Once you’re enrolled, your benefits can include lower interest rates, waived fees, an end to collection calls, and a budget plan you can live with — all at rates a lawyer wouldn’t touch.
Furthermore, you can get started in a debt management program with lower debt balances — less than $10,000.
Credit counseling is a competitive industry, so shop around. Compare services, qualifications, certifications, access and cost. Don’t confuse them with credit repair companies, which peddle services you can perform on your own. And if you run across any that want fees upfront, move along; that’s not how reputable credit counseling agencies work.
Listen, it’s noble to want to get yourself out of the fix you put yourself into. But being noble doesn’t get your interest rates shaved, end annoying collection calls, or hold you to a plan of success. Nonprofit credit counseling agencies do all of that, and more.
Enroll, get a plan, and follow it, and this time next year, you won’t believe you ever even thought about bankruptcy.
Finally: really good news.