Individuals who are financially delinquent may have difficulty paying their taxes, mortgage payments or credit card and medical bills. Although the economy and job market has improved for some Americans, unemployment and the cost of living remain high.
If you are trying to avoid financial delinquency there are some steps you can take right now to improve your situation. Let’s discuss the most common steps below.
Steps to eliminate financial delinquency
- Create a budget
The very first step to solving any problem is to admit there is a problem. It works with alcoholics, and it can work for your financial delinquency situation too. For your finances this starts with creating a budget.
You have to understand how much income you are generating each month and how you are spending it. After you have identified your income and expenses you can take the next step.
- Improving your financial status.
The second step to avoid financial delinquency is to either increase your income or decrease your expenses. Getting a second job or going back to school to potentially get a better job may or may not be an option, but almost everyone can cut their expenses.
Take a hard look at how many times you eat out each month, and whether or not you are really using that gym membership. Another option is to sell valuable possessions or sell your car and find an alternate means of transportation.
- Talk to your creditors.
Next, talk to your creditors. You can call all of your credit card companies and find out if you can get a better interest rate or better payment terms. Tell them you’ve been a good customer.
If you live in an area which allows you to choose your electric company you may also be able to lock into a contractual rate that is far below what you are currently paying.
If you are having trouble paying your home mortgage you can talk to your mortgage lender. Discuss refinancing your loan, available loan modification programs, loan reinstatement, or forbearance.
Another option is to review governmental options to avoid financial delinquency of your home loan. Two programs currently offered include the Home Affordable Modification Program (HAMP), which allows qualifying homeowners to modify their loans and potentially reduce monthly mortgage payments, and the Home Affordable Refinance Program (HARP), which offers options for homeowners to refinance their mortgages.
- Sell your house
Although a house can be a great investment, homeownership is expensive and is not for everyone. Right now in many parts of the country the housing market is strong. If you cannot afford your house consider selling it now before financial delinquency leads to a home foreclosure.
- Filing bankruptcy
Filing bankruptcy may allow you to discharge certain unsecured debts by filing Chapter 7, but it should be one of your last options. Don’t file bankruptcy until after you have taken all of the steps detailed above.
If you are facing financial delinquency there are several steps you can take now. Do not wait until creditors are calling and your mortgage company is threatening to foreclosure on your house.
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