Hopefully your life and financial life have recovered by now from the natural disaster you lived through. If not, then we’ve got some work to do and if your income has not returned to pre-disaster levels we need to start thinking about dealing with your current debt levels.
As I’ve said before, the ability to restore your income is of paramount importance. If your job is still negatively impacted by the natural disaster and your income has been reduced or eliminated then we need to start thinking honestly about fitting your life into your new financial reality.
This means that the emotional hurdles you may have to face will be tough to cross. It might just be that what you assumed to be your future is now radically going to change if the income has been altered.
While you thought your life was going to be a nice suburban home and two cars in the garage, the loss of income or reduction in income is going to fundamentally alter that reality until we can get everything back on track.
By this time you might even begin to feel very worn out and hopeless as the grind to recover goes on. It’s easy to become depressed and unmotivated to take action when faced with this situation and nobody would blame you for curling into a ball in a corner, but I need for you to be strong and just keep putting one foot in front of the other.
And we’ve got some tough decisions ahead.
If it does not look like your income is going to return to pre-disaster levels in the next three months then we need to start taking definitive action.
If your income has returned to pre-disaster levels but you’ve built up some problem debt then a different plan of action is needed.
Right after the disaster I gave you the advice to use your credit cards for all the expenses and try to preserve your cash on hand. That was good advice at the time but by now you need to stop using them for expenses you can’t afford. The use of the cards was a temporary and emergency measure.
If income has returned and you can afford your regular credit card payments and rebuild your emergency fund savings account at the same time you might want to either talk to your creditors about any special internal payment programs they may have for natural disaster victims or talk to a credit counselor about a debt management plan to repay your creditors.
If you survived the crisis with a lot of debt but were able to keep up on your payments and have a credit score above 720 then instead of closing your credit cards in a credit counseling program you should consider an unsecured debt consolidation loan from places like LendingClub.com or Prosper.com. An unsecured debt consolidation loan can give you a lower monthly payment and a lower interest rate to help you dig out of the debt.
If you can’t afford your monthly payment then we need to look at possible problem debt intervention. See the next step.
It might be that even though you’ve tried to regroup in the last three months, it has not worked out as planned. In that case if the income is not back to previous levels you might want to honestly and logically think about a possible chapter 13 bankruptcy. You can click here to find a local bankruptcy attorney.
A chapter 13 bankruptcy will give you protection from your creditors, allow you to keep your house and give you court protection while you take some more time to figure out what your new reality is.
If things suddenly improve you can dismiss your chapter 13 bankruptcy and rebuild. But if things don’t improve you may want to talk to your bankruptcy attorney about either keeping the chapter 13 bankruptcy in place or converting it to a chapter 7 bankruptcy and get a financial fresh start and start rebuilding a better future, right now.
Don’t worry, bankruptcy is not the end of your financial life and in fact it is stupid easy to rebuild your credit. Read How to Easily Rebuild Your Credit and Have Good Credit Again.
I know life feels unfair at this point and there are lots of what ifs and wishes for a different outcome from the disaster but we need to play the hand we’ve got right now and start to rebuild your financial life.
By tackling the problem debt with some type of intervention we can change your focus from trying to repair the past to building a better future. That’s critical in your efforts to recover.
If you’ve followed my advice through this guide, step-by-step, I’ve not steered your wrong. But be careful, when it comes to dealing with the debt, others might.
The debt relief world is filled with opportunists and companies that are not all that legitimate. It is arguable that many actually have your best interest at heart. They are just trying to sell you their widget using commission salespeople.
These companies will paint a rosy picture and tell you that bankruptcy may not be necessary. But the reason they are telling you that is because they want to sell you their product.
If you want to get a good look at what your debt intervention options are at this point then I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction.
Then use the free How to Get Out of Debt Calculator to review your options.
Once you’ve identified a company you want to work with, then follow my step-by-step guide on what you should look for and expect from a good debt relief company.
It’s easy to twist a pained consumer into a debt solution that’s not right for them simply by playing on their emotional baggage. Don’t fall for that, instead, you need to make an impartial and non-emotional decision about how to intervene in your debt.
If you need to talk to someone about your situation, feel free to submit your question to me or talk to a debt coach.
It’s time to start moving forward and out of the debt holding pattern you’ve been in since the disaster.
This new future may include you now envisioning a new future in a different part of the country so you can get back to work. You may have to move. But by tackling the problem debt at this point you will have a better chance at recovery. Besides, it’s easier to find hope and light in the future when you are not being chased by collectors or threatened with lawsuits over debt you can’t repay through no fault of your own.