I shared just a summarized version of our debt story over at Keeping the Kingdom First recently. But oh how there is so much more to the story! We married young and in a time when it seemed cool to finance everything from cars to furniture to even some of our “necessities.” We made the mistake of running up a long list of debts in just two short years, and then spent nearly the next eight years trying to get out of debt and repair our credit. After that uphill battle, we swore off credit cards and financing anything forever! Of course, that’s when we fell prey to it all again.
As I have shared before, we are now finally at the halfway point of eliminating much of the debt we incurred during my husband’s unemployment, as well as finally getting all our bills and accounts brought current. {If you have ever dealt with unemployment at all, you know what I mean, and just what a huge thing it is to just be current on the regular monthly bills!} Up to this point I have been embarrassingly honest about our debt and financial situation, and the trend will not stop now. I want to offer a suggestion – a form of relief – to those who are walking down the same road we are on. But beware… this suggestion is not necessarily a popular one.
- Image via Wikipedia
We looked at the options of filing bankruptcy, in all honesty, because we saw no other way out. However, due to my husband’s job with the military, bankruptcy was not a viable option for us. The only other thing we knew of and could even legitimately consider was the option of settlements. Settlements – that can be construed as an ugly word in certain financial circles, but for us, it was a light at the end of a very long, dark tunnel. We contacted a number of our creditors – both credit cards and personal loans alike – and explained our then-current financial situation, asking the lenders to work with us to eliminate the amounts owed as quickly as possible. Some were quite understanding, and others were not. Some allowed us to break up a settlement amount into monthly payments we could afford. Some required one large payment to settle the account. Others simply reduced our interest rates enough that our regular monthly payments were lowered to an affordable amount. At any rate, we would not have been able to tread water financially right now had it not been for the settlement offers. Sometimes you just have to do whatever is necessary.
The fine print of a settlement offer is that it will stay on your credit report, most times reported as “paid” but with a forgiven balance. And the forgiven balance has to be reported as income when you file your taxes the following year.
How do you feel about “settlements”? Or bankruptcy? Have you faced either of them in our current economy?
{ 2 comments… read them below or add one }
Yes, we have chosen to settle several of our debts this way. We got in way over our heads and this provided some quick resolution to getting things under control. It was something we carefully considered and prayed about. It ended up being such a blessing. The only problem that we faced was that most creditors required us to be past due before they would settle. Did you have the same problem?
Thanks, Elizabeth, for your comment! Yes, we did have to be “past due” in most of our accounts before we could settle them. We also had to report the settlement amounts as income on the following year’s tax return. Overall, it was worth it for us to relieve some financial stress, but it does need to be an informed {and prayed over} decision!