Debt recovery can seem like an intimidating process if you’ve never been through it before. However, it doesn’t have to be! This guide will discuss and show you how to determine whether debt recovery is the right option for you, the top 10 ways to improve your debt situation, and more! No matter what kind of debt you have or where it comes from, Debt Recovery Australia can help you find a way to get yourself out of the cycle of debt and back on solid financial ground.
The different types of debts
Secured debt is typically a mortgage or car loan where the borrower pledges collateral in case of default. Unsecured debt includes credit card balances and other loans not backed by collateral. Priority debts include taxes, child support, and more.
Different types require different approaches
Not all debt is treated equally. For example, a debt you owe on your credit card might need a different approach than one owed in court. For this reason, it’s essential to know the following:
- How much time do you have?
- What type of debt do you have?
- What are the consequences of not paying it back?
- Is there someone else who can pay off the debt for you?
- What is the other person’s financial situation like?
- Are they going through bankruptcy or a similar process, like student loans?
- Do they want to work something out with you and make payments on what they owe?
Don’t panic – take control
It can be challenging to tell the difference between a mistake and fraud. However, the most important thing you can do is take control of your debt and work towards getting out of it as quickly as possible. An excellent first step is contacting the creditor and letting them know what happened. The earlier you contact them, the more likely they will be lenient with you.
Consumer debts and commercial debts are dealt with in different ways
Consumer debt is owed to a company or person that is not a bank. They are typically unsecured debts and can be settled out of court. A commercial debt is owed to a bank or a company with which the debtor has an existing relationship. Commercial debts are often secured, meaning if the debtor defaults on payment, the creditor can take steps to recover their money.
A bankruptcy proceeding will discharge some or all of your consumer debts but will not discharge any commercial debt. If you want your commercial debts discharged, you must file for bankruptcy under Chapter 7 of the Bankruptcy Code and then submit an adversary proceeding in bankruptcy court once you have filed for bankruptcy.
There are different ways you can approach it, each with its pros and cons
If you are experiencing debt problems, then you are not alone. Roughly one in five Americans live in a household with some credit card debt. However, it is essential to remember that this is not your fault if you are experiencing debt problems.
There are many reasons why people end up in the red, and the problem can stem from any number of sources, including medical bills or high-interest rates on loans.
It is not always your fault
If you are getting a call from a debt collector, they may have been hired by a creditor or lender to that you owe money, or they might be working on behalf of the government. As long as the debt is owed, there can be consequences if it is not paid off promptly. These include:
- Late fees that accumulate over time which can lead to an increase in the amount owed;
- A negative impact on your credit score, which could make borrowing money difficult and expensive for years;
- A lien is placed against your property which could result in foreclosure or repossession of your property if it is not paid off quickly enough;
- Other creditors are refusing to work with you because of the outstanding balance on this debt.
It takes time, but there is light at the end of the tunnel
Collecting a debt is not always easy, and it may take some time before you see any results. But if you stay persistent, debt can be collected from your delinquent customers or from a business that has gone out of business. Collecting on defaulted loans is even more difficult because it requires a great deal of legwork and patience to get repaid, but it’s all worth it in the end!
Don’t be bullied by creditors
When a creditor files a lawsuit, the court will typically set a date for you to appear in court for trial. The creditor will have to present evidence of the debt, and if you do not show up for the trial, they may win by default judgment.
If you win at trial, the judge may dismiss or award damages in your favor, including attorney’s fees or penalties. However, if you lose at trial and owe any money as part of the judgment against you, it is still possible for creditors to try and collect from you through wage garnishment or bank levy action.
One late payment won’t derail your efforts
While one late payment won’t derail your efforts, it’s important not to let things spiral out of control. The first step is recognizing you have a problem and then figuring out how you’re going to fix it.
Good credit helps everyone
It’s a fact that good credit helps everyone. If you have bad credit, it can cost you more money in the long run. The good news is that there are things you can do if your credit isn’t perfect to help improve your score. One of the best steps you can take is to make sure any errors on your credit report are corrected with the three major bureaus: TransUnion, Equifax, and Experian.
This may seem daunting, but if you can clear up any mistakes on your report, it will also make it easier for lenders to see how responsible of a borrower you are when they look at lending options for you in the future.
Conclusion
Debt recovery is an essential step in the bankruptcy process and can help you get back on your feet financially and emotionally. If you have a co-signer on your loan, then the co-signer should file for bankruptcy with you if they want to get out of their obligation on loan. It is possible to recover debts even if they were paid off in full or discharged through bankruptcy proceedings before deciding whether or not to file for bankruptcy yourself and how much debt you want to discharge.
