Debt Crisis and its effect on the country

A study recently conducted by Citibank indicates that nearly 37% of all Americans are going through serious debt crisis. It is imperative to understand what are the various parameters that need to be considered in order to qualify an individual or a family under serious debt crisis. Given below are certain parameters, which if fulfilled by a family or an individual is considered to be under severe debt crisis. If the

• monthly expenses exceed income by 20% every month.
• creditors' payments are running at least 60 days behind
• creditors are constantly following up and harassing the family for payment
• credit cards are all at their maximum and no additional spending is allowed
• family is making only requested minimum payment on each account
• family is falling further behind total payments every month.

Cause of Debt Crisis

The excessive borrowing of the money causes debt crisis. In order to maintain the status of living or making some purchases of high value such as buying a car,house, most people are lured by credit card schemes and advertisements and tend to overspend falling into the trap of debt.

Things become worse when a family or an individual becomes deeply indebted. In such situations the shadow of bankruptcy looms large, which everyone likes to avoid. If declared bankrupt the credit report of the person drastically deteriorates, thus making the life of an individual difficult for any future loan approvals. Every year thousands of Americans find themselves on the brink of personal financial crisis. But the point of surprise is that even though the people are willing to spend sleepless nights, they are very much reluctant to nullify the effect of debts and allow the debts to linger on.

Any Solution?

The practical solutions seem to be a far cry for people undergoing debt crisis. One of the alternatives could be the declaration of bankruptcy. But this is not the only option. The individuals need to explore different alternatives to help themselves come out from the serious debt crisis. In some cases, bankruptcy may seem to be the only option but those cases are very rare. Thus it is advisable to every individual that before committing to such extreme course of action, one must make sure that they have investigated every other options available.

Different credit counseling services are available throughout United States to help individual negotiates the debt problem. The various credit counseling agencies can be traced in the yellow pages or in the local phone directory or the Internet.

Most of these credit-counselling services operate as non-profit organizations, offering free initial consultations. These credit counselors will generally recommend few methods to resolve the debt crisis. Among the methods,  debt monthly repayment method, debt arbitration and negotiations, debt elimination programs and debt settlement programs are well known. They are in vogue extensively. It is up to the credit counselors to negotiate with the creditors and taking them into confidence, thus generating a possibility where the individual has to pay less amount of debt. The credit counselors also offer various workshops that will train the individuals to create personal budgets thus generating a sense of planning and savings of the financial means, which will give good result in the long run.