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Basics Beginner: Managing Your Debt

Introduction to Managing Your Debt How Much Debt Can You Handle? Understanding the Minimum Monthly Payments on Your Debt Manage Your Debt by Creating a Spending Plan, and Stick to It Create a Plan to Get Out of Debt Trading Unmanageable Debt for Manageable Debt Refinancing and Consolidating Your Debts Finding Help in Managing Debt When You Need More Help with Your Debt: Counseling and Bankruptcy Summary of Managing Your Debt
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When You Need More Help with Your Debt: Counseling and Bankruptcy

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When You Need More Help with Your Debt: Counseling and Bankruptcy

Counseling agencies

Creditors are leery of "deadbeat" debtors, so you may not be able to convince them of your sincerity. You may need to consult with the consumer credit counseling agency in your community. Often, creditors will work with a consumer credit counseling service to renegotiate and consolidate your debt so you can make manageable payments. However, your credit rating may be damaged if your debt is not paid in full, because creditors will report charge-offs and slow payments to the credit bureaus that track consumer credit information. You also need to be careful about selecting a credit counseling or debt consolidation service, as there are many questionable firms entering the market. For a list of reputable services, contact the National Foundation for Credit Counseling (www.nfcc.org/), the Financial Counseling Association of America (https://fcaa.org/), or the Better Business Bureau (www.bbb.org/). It is a good idea to check a couple of these organizations to see what services they will provide and how much their fees are. Reputable firms charge customers low fees—creditors pay fees to credit counseling services, which saves you money.

Things To Know

  • Before you can resolve your debt issues, you need to deal with their causes or the problems will likely recur.
  • Try talking with your creditors if you can’t make your payments.
  • You may need to consult a consumer credit counseling agency to help with your debts.

Bankruptcy as a last resort

If you cannot get relief from your creditors or consumer credit counseling services, you may need to file for personal bankruptcy. This should be your last resort. If you file for protection under the US bankruptcy laws, your credit record will report your action for 10 years, which may adversely affect your ability to borrow money.

Individuals filing for bankruptcy usually apply under one of two sections of the US bankruptcy code: Chapter 7 or Chapter 13. Bankruptcy generally protects persons from their creditors, but how it does this is different according to the section under which one applies. Chapter 7 is generally referred to as the liquidation bankruptcy, while Chapter 13 is based upon the restructuring of debt.

Getting professional help with bankruptcy

Should you decide to consider bankruptcy, consult with a bankruptcy attorney in your community. You can file for bankruptcy on your own; however, you will probably fare better with professional help. Check your local telephone directory or the Better Business Bureau (www.bbb.org/) for bankruptcy attorneys in your area.