When you’re feeling overwhelmed by debt, it’s easy to fantasize about an escape route. And while some will offer a path promising exactly that, acting without thinking can actually make things worse.
Let’s talk about what to avoid when you’re under pressure. If you’re in crisis mode, here’s how to steer clear of the mistakes that could cost you more in the long run.
Don’t Stop Paying
When you’re overwhelmed by debt, skipping a few payments can be a tempting prospect to, at least for a little while, stop the outflow of money from your accounts.
But pausing payments is a dangerous game. When you stop paying without a plan, you could be compounding your money troubles, not getting a brief reprieve from them. Non-payment means late fees, damage to your credit and sometimes even legal action. And once an account is past due, it may get handed off to collections or charged off entirely.
So before you skip that next big payment, stop and consider the bigger picture. Don’t entrench yourself deeper into the hole: Instead, begin advocating for yourself.
Evaluate Before Engaging with a New Plan
When a debt collector calls you, they may use emotional ploys to spur action. Your debt collector may make things sound urgent, but don’t automatically say “yes” to a new repayment plan yet.
Agreeing to new terms that don’t match your real budget can lead to missed payments down the road. Even worse, verbal promises made under pressure can be hard to take back, even if you never got anything in writing.
If your creditor gives you an offer, ask for documentation (or simply write it down). Do not make any promises to do anything more than review the new repayment plan — give yourself space to budget, then come back to them with your response.
Don’t Ignore Legal Notices
A common misconception in debt is that so long as a client is in talks with their creditor, they can’t be sued. Unfortunately, this is far from the truth.
If a lawsuit shows up in your mailbox and you ignore it, the court may rule against you simply because you didn’t respond. A ruling against you can lead to wage garnishment, frozen accounts or other long-term consequences.
If you get something that looks official, take it seriously. Look up the court listed in the paperwork. You can also reach out to a legal aid group in your area if you’re not sure what to do next.
Watch Out for “Too Good to Be True” Promises
When you’re desperate, fast solutions feel like a lifeline. That’s where people fall down the hole of false promises from companies who claim that they can erase your debt overnight, stop all collections or clean up your credit instantly. These incredible promises should raise red flags.
If you’re being pushed to sign up right away, pay upfront fees or agree to a plan you don’t understand, step back. You should always get clear answers before committing to anything.
Ask the Right Questions
Money troubles can inspire a special kind of panic, and making the choice to slow down when you’re feeling that way could be tough. But hitting pause on the mayhem is one of the best things you can do to move forward.
If you get an offer from your creditor for a more affordable repayment plan, don’t commit on the spot. If someone won’t let you take a day to think, that’s a sign to walk away.
In all cases, ensure you get the program details or repayment proposal in writing, and double-check their math. If you can get ahold of a third-party financial resource — think a non-profit credit counselor or financial advisor — ask them for their perspective. It’s handy to have someone outside, yet knowledgeable, about your situation to help you see clearly. There are answers: You just need to know how to evaluate them.