How To Deal With Debt Stress

Get expert advice on how to deal with debt stress and excessive debt. Do not let that debt suck the joy of life out of you. See seven practical steps here on how to deal effectively with any amount of debt and come out of it stronger.

"Up to 1 million people are on the verge of declaring bankruptcy as they struggle to cope with thousands of pounds debt" - reports the London Metro newspaper recently.

And what is more? Over 12 million searches were made for the words: debt advice, debt consolidation advice and bankruptcy online in the last 30 days worldwide. Global debt levels currently stand at about $100 trillion.

Debt is thus becoming a gusty epidemic. It exerts a crushing burden on an increasing number of individuals daily. If you own significant amount of money on your credit card or on your overdraft and bank loan and are struggling to pay back, you would be well too familiar with the anxiety and stress this can cause.

If you are in debt and feeling the pressure, you are not alone.

Those once "nice" bank staff no longer want to take your call. You go into your branch or even online to apply for  "just this last single loan" to clear all the numerous debts here and there so that you can plan your way out of debt, but no one would lend to you. Things could get really messy.

You have probably ask the following questions:

  • What practical steps can I take to reduce and pay off my debt?
  • Will I ever be able to pay off this mountain of debt?
  • What are my options?
  • Should I go for debt consolidation, IVA, or declare bankruptcy?
  • What if I cannot get a debt consolidation loan? My credit report is nothing to write home about.
  • Where do I get bad credit debt consolidation loan if at all?

These are questions faced by over "8 million people" in the UK alone, making up "one in five of the UK adult population – who owe more than £10,000 through credit cards, overdrafts and loans" continues the paper - Italics ours.

If you find yourself trapped, here is how to deal with debt stress the right way.

  • Resolve to take practical steps to deal with your debt
  • If you are having trouble sleeping or becoming too irritated and anxious, see your doctor. You may benefit from the use of a short term anxiety medication like zopiclone or Lorazepam while you take steps to actually deal with this problem. 

We list seven practical steps on how to deal with debt stress below.

How To Deal With Debt Stress And Anxiety: 7 Practical Steps.

You can enjoy a true sense of relief from debt forever.

If you have debts that you really struggle to pay off, do not let it sap you of your joy. You can overcome not only the stress and anxiety debt brings, but you can fully pay off and overcome your debt.

The following are available debt solutions or debt management steps to overcome worrying debt situations :

1. Don't Play The Ostrich

Because debt stress can literally drain you of all energy and will, many people give up and resort to do nothing. They are in effect playing the ostrich. They think that if they ignore the debt, put their head in the sand, the debt would somehow just go away.

This is a no option.  Do not do that all. Except:

  • If you are seriously in debt and are not receiving any wage or have become unemployed, without any asset, property, or do not wish to borrow credit in the future, doing nothing may not bring you to further financial difficulty.

Your creditor (s) will be very reluctant, and indeed unsuccessful in bringing legal action against you, as they would not be able to make any collections from you through the courts.

With numerous debt solutions today, there are more honorable debt steps to take to reduce debt stress by dealing with debt head on. They include:

2. Draw Up A Clear Personal Debt Solution Plan

Make an honest re-evaluation of your financial situation.

Add up All your debts and write out how much you owe. Be very clear on the total amount including the rate of interest you are paying on each one of them.

Recognize the need to halt the growing debt problem by instituting personal debt solution plan and there by help restore your financial health and avoid possible bankruptcy

  • Personal debt solution plan will involve drawing up a tight budget to reduce your monthly spending
  • Analyze your spending habits and cut off expenses that can be avoided like unsubscribing to cable TV
  • Reduce how much cigarette you smoke per day if you smoke,
  • Stop using credit cards
  • Use public transport instead of your car if it turns out to be cheaper
  • Change your telephone provider or re-routing your calls through a cheaper provider
  • Change your mobile phone tariff if you are on a contract to one with less data and only browse the internet when at home or at work when you have access to WiFi
  • Taking food to work instead of buying lunch from the restaurant, and other steps mentioned on how to avoid bankruptcy.

3. Consider Consolidating Your Debt Into One Single Loan

Go into your bank. Book an appointment with a financial adviser. Lay bare your financial state and plans you have drawn to address these. Request to take a debt consolidation loan.

What is debt consolidation?

This is the taking out of a lower interest rate loan to pay one or more loans with higher interest rates. Debt consolidation is a very popular and smart way to manage one's debt. You can get a debt consolidation loan from banks, building societies, or even by taking out a new credit card.

With the presence of zero percent (0%) credit cards offering zero percent interest on balance transfers for 6 – 18 months, it may be a wise step. But debt consolidation may not be an option for some. Please read more on debt consolidation to determine and decide if it is the right debt management solution for you.

4. Can You Re-mortgage Your Property?

This may be another option if you own a property, and can not get a debt consolidation loan.

  • You can release the equity on your home and raise cash to pay off all or part of your debt.
  • This debt solution step has the added advantage that home loans or mortgages are usually at much lower rates compared with the traditional loans.
  • You may then decide to fix the term of your mortgage to as a guide to fluctuating interest rate. 

Please discuss this option fully with your financial adviser or a mortgage expert to be sure of its suitability for your own specific situation.

5. Contact And Negotiate With All Your Creditors Directly

If all the above measures fail, you may just need to take this next action. It is also called debt settlement negotiation.

Debt settlement involves you calling up your creditors or writing them and asking them to agree on a settlement plan with you to pay only a part of your debt over a period of time, paying a monthly or weekly amount you can afford.

If you really find your self in a dire financial straight, this may be an option for you.

Do not feel timid about it. Go for it.

You could even get a debt management company to do this for you. You can do it yourself though and should be the first step. Creditors tend to agree to a debt settlement proposal because they know that it may also be a safer option for them too, to get part of their money, without having to loose everything.

  • Have a list of all your debtors and how much you owe each
  • have a clear figure of how much you would be able to pay every month when you get your pay check or income.
  • If it is only £50 you can pay after feeding and rents etc, share this amongst your creditors.  Apportion £5 monthly to L&D limited for example and £10 to M&S Credit Cards, etc depending on how much you are owning each
  • No amount of money is too small as long as you absolutely commit to that payment amount monthly
  • Also request that further interest on your debt be frozen.

Some times, and depending on the country, debt settlement solutions may be agreed without it reflecting on your credit report. In such case it will not affect you. In other places, this may show up in your credit report, thus affecting your eligibility and ability to get future credit. That should be your list concern now.

6. Individual Voluntary Arrangements (IVA)

Individual Voluntary Agreement or IVA is the next step just before bankruptcy in the United Kingdom. It is also known as "friendly bankruptcy". It is more or less like the individual debt settlement negotiation, except that it is done via an insolvency practitioner.

In Scotland, it is called Protected Trust Deed.

IVA or Protected Trust Deed in Scotland, is a formal proposal made by a debtor to creditors via a licensed "insolvency practitioner" so that the debt can be repaid according to what is affordable over a period of time, usually 3 – 5 years. This arrangement is only possible through the use of the so called insolvency practitioners, and they often deduct their fee from the repayments made.

Be very careful of choosing your insolvency practitioner, if you choose to go this route. There are many rouge practitioners out there.

It is a better option than bankruptcy, but it comes with a price, in that you may have little or no access to credits while this arrangement lasts. It is by far more dignifying than bankruptcy.

7. Declare Bankruptcy

If all fails, rather than continuing to endure sleepless nights and developing indigestion, becoming irritable and with a real risk of developing high blood pressure, declare bankruptcy.

  • Bankruptcy should be the very last resort to solving your debt problems.
  • Bankruptcy is a legally declared inability to pay what you owe.
  • This frees you from been harassed in any way by your creditors, and debts are written off.
  • It however means that you can not have access to credits for at least 10 years, and portrays you as a bad borrower.

Filing bankruptcy comes with a very heavy price that may shatter one’s financial and possible social reputation. Nevertheless, it could be the only way out of a crushing debt burden for millions. It is worth avoiding, if you can, as a debt solution. It could affect your prospect of getting jobs and loans even after being discharged.