One of the most common debt traps is spending money that isn’t there yet. Although you can theoretically not spend anything that is not also credited to the account, debtors in this category always find a creative way to bridge the time until the planned money arrives. Loans from friends, sometimes even bank loans, credit cards, purchase on account and non-payment of the invoice – such methods can actually work well if you keep a careful eye on the money spent and pay it back conscientiously. At this point, however, the problem comes into play. The incoming money, be it through salary, other loans or similar sources of income, is not available for the expenditure already made. Because it is important to pay additional costs such as rent payments, electricity and food costs – and of course the ever increasing debts. So instead of using the income to pay off the debt, it will be used for other things and the debt will remain
How do debts arise?
Debt from money spent that is not there yet is not necessarily the result of poor financial planning. It is much more common that the debtor does not have his needs well under control and always wants or has to buy something new. The money is not considered. In some cases, financial hardship requires such behavior. The basic income for essentials is no longer sufficient for the debtor, so he considers how he can delay the payment of important costs and less important purchases. As a result, open bills add up and new debts arise to pay them. In these cases it can often no longer be said that only the money to pay the debts is not yet there. Rather, this approach has created a real debt problem: The debts to be paid can no longer be borne by the incoming payments. It is a difficult step for many affected debtors to become aware of this unpleasant truth.
Types of debt traps:
- Debt trap credit card
- Debt trap smartphone
- Debt trap cell phone
- Debt trap home
- Debt trap car
- Debt trap teleshopping
- Debt trap installment purchase
- Divorce Debt Trap
- Debt trap condominium
- Debt trap overdraft facility
- Debt trap home finance
- Debt trap subscriptions
Now with a loan out of the debt trap!
Important: problem detection of the debt trap
Even before a payment plan is developed, the debtor should think about how he got into the debt trap. Is it due to consumer behavior? Is there really too little income for basic living expenses? Is there a fundamental problem with paying bills on time, even though the money might even be there? If the problem is not identified, even with a well-thought-out repayment plan, debts may arise again. Experienced and sensitive debt counseling can help to identify such developments together with the debtor and provide tips on how to solve them, even while the repayment plan is being drawn up.
How to deal with debt?
The most pressing question about debt out of money that has not yet been there is how to deal with the debt that has now arisen. It is clear that they have to be repaid. How this can happen depends on income, cost of living and urgency of the debt at the time of trading.
Sufficient income, negotiating creditors
In the best case, the creditors are approachable and ready to negotiate, the incidents are neither with the debt collection agency nor the bailiffs and the debtor’s income is sufficient to invest something in the debt reduction every month. In the case of long-standing debts, the debt collection agency is still the better contact than a bailiff who is supposed to collect the money, as debt collection agencies are more flexible in negotiating options and less rabid. In fact, they talk about almost any payment method, as their economic success depends on not handing over the debt to a bailiff.
Low income, creditors willing to negotiate
The creditor will not be happy about a low income for the repayment. However, if the debtor shows a willingness to pay the money, no matter how low the rates, creditors and debt collection agencies often have to agree to it. It is all the more important in these cases to pay absolutely on time and never to incur further debts. It should also clarify why income is so low and whether there are ways to work on this problem.
Sufficient income, urgent debt
Debt becomes problematic when bailiffs come into play. They have very different means of collecting money than friendly letters. In any case, contact with them must be sought early, before enforcement takes place. With sufficient income, repayment agreements can be concluded for a maximum of six months. Punctual payment is mandatory, otherwise the installment agreement may become invalid.
Low income, urgent debt
In such serious cases, debt counseling should be urgently sought. If this has not yet happened, they will work out a debt and repayment plan together with the debtor. This can be presented directly to bailiffs, collection agencies and creditors. However, it can also make sense to think about measures such as an affidavit to defer the debt or a personal bankruptcy to reduce the debt over six years with subsequent freedom from debt. Decisions like this should not be taken lightly, debt counseling also helps in these cases.