Financial Crisis

Are you or someone you know dealing with a financial crisis or have one coming on the horizon?  If so, this post is for you.  There are many things that can precipitate such an event.  Anything major like a job loss, severe income reduction, injury, or personal crises such as divorce, or death of a loved one can cause it.  But also something as ordinary as chronically overspending, not paying attention and being sloppy with your handling of money can too.  No matter how you got into the mess or whose fault it may be, the fact remains you are there and there is nothing you can do but go forward.  So what can you do going forward to minimize the damage?

1.  Do NOT under any circumstances completely ignore phone calls, letters and demands.  This will only make things worse.  Set boundaries as to how often you will talk to them.  Once every week or two is usually sufficient unless something suddenly changes.  Having good communication with them can actually slow down or stop their proceedings until you can work out a deal and get back on your feet.  Ignoring them will only speed up the process and lead to wage garnishments, which will cause further damage.

2.  Establish good communication with the lenders, collectors and/or attorneys you're dealing with.  Be up front and completely honest with them.  Share your budget with them if necessary to show you are serious about solving the problem.  It will take some doing but you will eventually find someone who will work with you, even if that means being sued and talking to the attorney in charge.  This holds true if you facing foreclosure, repossession, lawsuits or wage garnishments.

3.  Decide what you are going to do.  No matter what you're facing you have to decide whether you are going to fight to keep the house or car you're behind on or let it go.  If you decide to let it go, try to sell the item before it gets taken by the lender.  A short sale is better on your credit than a foreclosure and it's better than just walking away.  If your car is repossessed they will sell it at auction for a fraction of what it's worth and then come after you for the difference.

Here are some guidelines to decide:

If you weren't behind can you reasonably afford it?
Do you really need the item? Or can you downsize to a cheaper vehicle or living situation?
Can you work out a deal to catch up the payments?
Does keeping it stress you out more than letting it go?

Depending on how you honestly answered these questions then as painful as it may be, you may need to consider letting it go.  Every case is different and what's best for one might not be the best for another.  Just  remember two things.  One, relationships are more important than a house or car, and two, do your best because that's all you can do.  It will be stressful and take a lot a work but you will eventually come out the other side.