Getting out of debt can be quite painstaking and if you have family members to depend on you it is the worst. This is what happened with Paul. He was the sole bread earner of the family and had his parents living with him. Paul had 4 credit cards which he used only when he was without cash.

Presently, he has enrolled for a debt consolidation program so that he can become current with his bill payments once again. It may appear to be quite surprising that despite being financially responsible, a debt consolidation program was in store for him. So, how did he fall into the debt trap?

Getting Into the Debt Cycle

There are 2 identifiable reasons that can draw you into a vicious debt cycle and cause your finances to go berserk. One is sudden unemployment and the other is a medical emergency. So, how can you pay off  bills if you are in a similar situation? Paul had a steady income and never missed any payments. However, the cerebral attack his father succumbed to proved to be a turning point in his life. He mopped up all the cash he could from his friends and relatives to get his father treated.

Paul’s monthly income wasn’t enough to support an expensive treatment. So, Paul approached few creditors to avail fresh credit. And he started using his plastic cards frequently. The first few months were smooth and Paul didn’t miss a single payment. However, following the subprime mortgage crisis, there were many credit card issuers that reduced credit limits and altered credit card payment policies. Paul was not notified about the same and this is when he fell behind on payments as he was unable to pay the minimum monthly payments.

Getting Out of the Debt Cycle

Acting wisely as he always did, without wasting time he approached a credit counselor. Paul didn’t allow his bills to assume a bigger proportion because he had seen his friends filing bankruptcy and the consequences they faced. And he was aware of the consequences of filing bankruptcy. The credit counselor assessed Paul’s financial situation and suggested that he enroll for a debt consolidation program.

Since Paul was already juggling his finances, he didn’t want to spend an astronomical amount on the debt consolidation program he enrolled for. So, a non-profit debt consolidation company came to his rescue. Prior to hiring the services of the non-profit debt consolidation firm, Paul verified if the company was accredited by the Better Business Bureau. Once he was sure of their credibility, he enrolled for the debt consolidation program.

The debt consolidation firm charged very nominal fees for offering their services. The firm negotiated with the creditors and convinced them to reduce interest rates and lower monthly payments. The multiple debts Paul owed were merged into a single debt account that made debts manageable. A repayment plan was prepared that has helped Paul to keep track of the monthly payments and he is currently making payments as per the new repayment schedule. Paul has promised not to drop out of the program and has almost wrapped up his debts.

Is Debt Consolidation Right for You?

If you have small amounts of debt, debt consolidation may not be worth the hassle and fees. However, once you get above $10,000 or so, debt consolidation starts getting more and more attractive.