KSLA News 12 Shreveport, Louisiana |What To Do When You Have Reached The End of Your Financial Rope

What To Do When You Have Reached The End of Your Financial Rope

SHREVEPORT, LA (KSLA) - Credit and debt have become so intertwined in our every day lives, that the first major signs of financial distress may not appear obvious.

"When it gets to the point where you use credit cards to pay bills then, then you know you're in trouble," says Fernell Mitchell with Consumer Credit Counseling Services. 

"I didn't like it, I went back to cash," says Pearlena Brookins of Shreveport. Brookins successfully graduated from a debt management program, in her case through Volunteers of America.

Fernell Mitchell at Consumer Credit Counseling Services says they've definitely experienced a surge in new clients with the souring economy.

"What we do here is you'll pay back every penny that you owe through this program and through us, it's just at a reduced interest rate," says Mitchell.

The is catch even as a non-profit, CCCS charges a monthly service fee, up to $40 a month in some cases.

Brandi Baker urges people to deal directly with collections agencies.

"It's better to go here first because the other avenues will affect your credit negatively," says Baker.

The Credit Bureau of Louisiana even pitches a special service:

"We do remove it completely off your credit report once it's paid in full, where it doesn't show paid," says Baker. "It completely comes off so that it doesn't affect your credit score in any way."

Mitchell insists that CCCS also urges clients to do it themselves.  His agency helps those simply too overwhelmed to do it on their own.  

Debt counselors can also help avoid potential trouble like debt settlement companies, which promise to cut your debt in half.

"They'll wait until they have enough money built up in an account," says Mitchell. "When they feel like they have enough they'll start calling and contacting your creditors just trying to negotiate settlements."

This is not a bad option for those who already suffer from horrible credit, but for others, their credit deteriorates from bad to worse as creditors keep calling, while that money builds up.

Whether it be Mitchell or debt collectors like Brandi Baker, there is a general consensus that, at some point, bankruptcy becomes an option for some.

"Bankruptcy shouldn't be your last resort," says Charles "Pete" Kammer, bankruptcy attorney. "That should be one of the first things you look at. And it's not so much to decide whether you're going to file, but look at your options."

Shreveport bankruptcy attorney Charles "Pete" Kammer warns that all-too-often people wait way too long to consider bankruptcy when critical signs emerge.

Kammer says those who get too far behind on house payments can't salvage the house during bankruptcy.  Others take extreme measures trying to fight off bankruptcy.

"People will jump out, they'll get second mortgages, they'll get consolidation loans with very high interest rates," says Kammer.

That second mortgage can be the kiss of death for those who eventually succumb to bankruptcy because that debt cannot be wiped out. 

To rid yourself of mounting debt, like Pearlena Brookins did, the lesson may be: act now, not later and stay focused.