It is a given fact that the vast majority of people living in the United States will fall into some type and level of personal debt during the course of their lifetime. The credit culture is so ingrained into the psyche of the American people and society that it is almost unfathomable to imagine anyone who has the wherewithal to take out a credit facility, not doing so. In many cases, even people without the wherewithal to take a credit facility, often still apply for and get given that credit facility.
The reason, source and amount of these debt will always vary from person to person as will the ability of each person to repay their debt vary from person to person. The one thing that is however common to everyone, irrespective of their situation, is that the consequences are, in many ways somewhat the same, if they end up not being able to service their debts. If such a time comes, then the word that might come into play, is bankruptcy. Something which is not a favourable thing for the individual, personally, or with regards their business dealings.
In the same way that individuals can quickly and easily rack up a debt profile, businesses too can do the same. For a business, this may or may not be as dire a situation for the business, as compared to an individual. Reason being that a business is assumed to be a revenue generating entity, and therefore, should have some regular cash flow to service its debt. Also, a business, whether it be an LLC or a corporation is often assumed to be a separate entity from its owners, therefore a business that files for bankruptcy does not necessarily affect the individual owners directly.
The absolute worst of these situations is when the same individual has racked up both personal and business debts. In such situations, unless the individual’s business is generating a fairly large amount of revenue or profits, or alternatively earns a sizeable amount of money from a day job, such that he or she is able to sufficiently service both debts, having to deal with multiple creditors can put quite a strain on the individual, which could easily impact the person’s health, family life and relationship, and possibly more.
So how does one get themselves out of such a situation they might have dug themselves into? The first thing to say is that perhaps the smartest way to get out of such a situation is to manage it properly. Of course it goes without saying that it of course would be best not to get into such a situation in the first place, but if it does happen then managing it is the next line of defence.
So what exactly is the best way to manage your personal and business debts?
Tips to Manage Your Personal and Business Debt
Here are four effective methods:
Debt consolidation simply refers to your taking out a new loan from a new creditor, to pay off all or some of your other different and individual debts, both personal and business. The benefits of such a consolidation are many, some of which are:
- Now having to deal with only one party, as opposed to multiple parties previously. Which is something that can cause problems for you such as mixing up settlement dates, forgetting what accounts you settled, and which you didn’t, etc.
- The possibility of having lower interest rates and/or better repayment terms. The consolidation company knows that the reason you are seeking their service is because of some difficulty in settling or dealing with your current creditors, so quite possibly, they might be willing to give you more favourable terms, or interest rates.
- Refrain from taking on as much debt: Some people equate this sentence to mean the same thing as cutting on costs. However, technically speaking, refraining from taking the credit in the first place is less likely to allow you to go on a spending spree, as you simply will not have the money, nor the temptation to go spending, more so on things that you absolutely do not need, or things that you can live without.
- Seek Legal Counsel: While you very likely are not interested in having a lawyer poking their nose into your personal or business matters, sometimes, you may actually need them to do so. For instance, you should preferably have a business attorney read over any new contract that you will be signing with your new creditors, if for instance you are going the debt consolidation route, making sure they read, understand and explain all the ‘fine prints’ of the contract to you, so that you are sure you are not going to land yourself back at square one, or even in a worse situation with this new creditor.
- Debt-management companies: There are also professional debt-management companies that you can get in touch with to help look into your finances and advice the best way forward. Perhaps one of the best values such companies bring to the table is the fact that they are able to better sniff out any irregularities or inefficiencies in your payment terms and can possibly suggest alternative arrangements.
In all likelihood, you are likely going to want to do several or all of the above listed steps in a bid to better manage your debts. The one thing you absolutely never want to do is to let your creditors chase after you because you are not servicing your debts as at when due. The last thing you want to do is to (a) get a bad reputation with one creditor, a reputation which other creditors can very easily get wind off. And (b) suddenly have a sheriff of the court issue you with a court summons to appear before a judge, or to simply have a writ of attachment judgement issued against your property. A word is enough for the wise.