Bad Debts - What They Can Mean For Your Financial Future
As the economy both at home and abroad continues to struggle along, a number of households are finding themselves unable to repay their debts. From individuals with high bond payments and loads of credit card debt to small business owners who are struggling to meet their monthly expenses and service their companies' debts, more and more people are finding themselves saddled with bad debt - but what are the consequences?
If your monthly repayments are a little too high, or if you're failing to make payments altogether, you may be in danger of becoming a bad debtor. This could have several consequences for you, depending on how much debt you have, what type of debt it is, and what your income is.
Individuals with bad debt
Examples of bad debts that an individual person could accrue include credit card debt, bond payments, retail account payments, and personal loans. If you are behind on any of these payments, or are struggling to make them each month, you should speak to your creditors about relaxing your repayment terms without delay. If you fail to make payments, you could find your property taken away by the bank, or you may lose your possessions as they are seized by your creditors for failure to make payments.
If you're concerned about making your payments, you should approach the bank (in the case of a credit card, home loan, or car payment) or your creditors (for example, a retail store) to inform them that your payment may be late. If you are granted a grace period - an extension on your payment date - you'll need to make the payment within that time. If you find that you are unable to make all your payments in a given month, except in a month where you had a large unexpected expense, you should consider debt counselling as a serious option.
Business Debt
If you are sole proprietor of a company, you may be personally liable for all the debts owed by the business. Even if your company is not a sole proprietorship, bad debts will result in judgements against your business and will affect your bottom line - if your business is unable to make a profit each month due to debt, you are running a serious risk of bankruptcy. If you find yourself in this situation, contact your financial advisor immediately and request an urgent meeting to resolve the matter.
About the Author
Nico Kleynhans CFP® is able to make the principles of Financial Management easy to understand. By means of games, books and seminars, clients learn how to apply these principles in their lives. He is the author of SENSIBLE FINANCIAL PLANNING SERIES of books. The first title in the series is 'HOW TO IMPLEMENT DEBT MANAGEMENT THAT WORKS'. The Kindle release date is 7th January 2013 http://www.northwood.co.za
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