Deciding if Now is the Time to Settle My Debt

Deciding at what point you should settle your debt is a very personal decision. For many people the idea makes them feel hopeless, disappointed, anxious, even depressed.

However, there are specific instances when settling your debt isn’t just the wisest choice, it’s your only choice. Here are some tips to help you determine if you should settle your debt.

You Can’t Make Minimum Payments Due to Personal Problems 

If you’ve taken a hit to you finances due to a recent divorce or job loss, consider settling your debt. Divorce alters nearly every aspect of your life including your ability to work effectively and stay healthy, which could compound your debt problems. Losing your source of income could send you into further debt.

You’ve Have Medical Problems that Impact Your Ability to Repay 

Medical problems can have several repercussions when it comes to your ability to repay your outstanding debt:

  • High medical bills cut into your net income. If you have to pay for things such as health insurance, medical services, and prescribed medications, you have less money for other daily expenses. Foregoing your medical care is not an option.
  • Medical problems prevent you from earning a living. Regardless of your medical condition, if you cannot work, work only limited hours, or are on Social Security or disability insurance due to your medical condition, it may be time to settle your debt rather than risk incurring more debt.

Your Level of Debt is Sky High 

Sometimes it’s tough to admit you need help, so you let your debt continue to accumulate. But just how much debt is too much debt?

According to the Time article, “5 Signs that Your Borrowing Too Much,” total debt payments should not exceed 36% of your take home pay. Once you exceed that amount, you are in over your head. Additionally, they go on to say that any credit card debt that you carry from month to month is excessive. 

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When it’s Time to Settle Your Debt

Here’s what you need to know. Not all debt settlement companies are alike. There are those that let you control your money and there are those that handle it for you.

Those that advise you to stop making payments to your credits and send your money to them are not members of The Association of Settlement Companies (TASC). According to certified financial planner and author Ken Clark, TASC members never “handle, manage, or otherwise control their client’s funds, to avoid even the appearance of impropriety.”