1).
Do Nothing - The debtor in distress can simply decide to
take no definite action, and allow things to happen to him.
He can allow his wages to be garnished, his automobile to be
repossessed, his bank accounts to be levied upon, his house
foreclosed upon, he and his family to be pestered by incessant
debt collection phone calls, and otherwise allow himself to
be hurled into the maelstrom of collection action by aggressive
creditors. In effect he can simply allow nature to take its
course, and his creditors to exercise all of their legal rights.
This usually is not a great idea. It takes a thick skinned-individual
to put up with such a steady barrage of phone calls, mail and
direct confrontation with creditors. However, it has been done.
2).
Absconding or "Going Underground" - The
debtor may decide to simply avoid dealing with his debt issues,
and move clandestinely to a new city or state, or even country,
to try to start anew, free of his financial baggage, in the
hope that his creditors will not pursue him. This may work,
depending on the circumstances. This probably was quite common
hundreds of years ago. Even the legendary woodsman Daniel Boone
left his Virginia home for the wilds of Kentucky, just one step
ahead of his creditors. In the modern era with advance technology,
this tactic is decidedly less effective. The downside, of course,
is that a debtor may be leaving behind his friends and family,
and ultimately may end up just delaying the inevitable denouement.
3).
Direct Negotiation with Creditors - The debtor may negotiate
directly with his creditors and try to make manageable arrangements
for payment of all or a portion of the debt. This may involve
reduced payments, lower interest rates, or possibly discounts
on the principal of the debt owed. The advantage to this is
that the debtor does it himself, and does not have to pay anyone,
like a lawyer or a debt adjuster or debt
consolidation expert, to help him. It helps if the debtor
is reasonably sophisticated in business and financial matters,
and not afraid to negotiate with banks and other professional
lenders and creditors. In effect, he can try to "punch
his way out of the bag".
4). Employment of Debt Consolidation Agency - The debtor
may elect to hire a professional debt
consolidation agency or adjuster to deal with his creditors
and attempt to make deals with them for reduction in debt or
agreeable payback terms. Some of these agencies, including
National Foundation for Credit
Counseling (NFCC) are experienced and quite reputable and
perform a valuable service to the community. This cannot be
said of numerous other debt consolidation agencies, and the
debtor must be very careful in his selection of debt adjuster.
5).
Increase Income - The debtor can seek to improve his income,
by
getting a better job or a part-time position to supplement his
regular income. He can go back to school for a better education,
which may help him land a higher-paying job. Usually, though,
this will entail at least a temporary drop in income while he
completes his studies. Also, more education does not always
translate into a higher-paying position. We have all heard the
reports of of a corporate CEO now manning the barista lines
at the local Starbucks, working for just above minimum wage,
and a hope and a prayer of getting a handsome tip from a satisfied
latte' drinker.
6).
Incur Less New Debt - A debtor can "tighten his belt",
and try to reduce his expenses by eliminating "luxury"
items, and carefully watching his expenditures. There are myriad
resources, including web sites, books and pamphlets, about consumer
budgeting. This may assist the debtor in having a better cash-flow,
and avoid the need to file
bankruptcy. Compulsive shoppers, gamblers, recreational
drug users and others with out-of-control spending issues, can
seek assistance from qualified health-care professionals and
12-step recovery programs.
7).
Sale of Assets - A debtor can try to avoid
bankruptcy by selling extra or unneeded assets to raise
cash. This is also called "asset liquidation". This
can be done through craigslist,
eBay or other online sale
and auction sites, or at garage rummage sales and local flea
markets. This may help the debtor pay down or pay off some of
his debts, and make the payments on the remaining debt more
manageable. If the debtor sells stocks or other securities,
he should first check with his tax professional so that he is
aware of any possible tax consequences of such a sale, including
capital gains tax. Often, debtors will cash out IRAs and other
retirement plans in order to pay their debts. This should be
done only after careful analysis and knowledge of the tax and
other consequences of early withdrawal.
8).
Borrowing of Money - Sometimes, a debtor can seek to borrow
money from family or friends, at either no or low interest,
and pay off or pay down high-interest obligations like credit
cards. This may provide a non-bankruptcy option. The debtor
should make sure that he is able to repay the loan, and that
it is not just a short-term "fix" that moves him out
of the frying pan and into the fire. Money issues involving
relatives, family and friends can be a thorny matter. They are
often the root of many spousal and domestic squabbles, the end
of many of long friendship. Careful consideration should be
given to these concerns prior to entering into such transactions.
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