Knee Deep in Debt

Having distress paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your automobile?

You’re not alone. Many people face a financial crisis approximately time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from terrible to of poorer quality.

If you or a name you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt negotiation is yet another option. How do you know which will bring about best for you? It depends on your level of debt, your level of restraint, and your prospects for the future.
Self-Help

Developing a Budget: The initially step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your “fixed” expenses — those including the intention of are the same all month — like mortgage payments or rent, automobile payments, and insurance premiums. Next, list the expenses including the intention of vary — like entertainment, recreation, and clothing. Writing down all your expenses, even those including the intention of seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, provisions, health care, insurance, and education.

Your broadcast library and bookstores have information about budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and making plans to save money and pay down your debt.

Contacting Your Creditors: Contact your creditors immediately if you’re having distress making ends meet. Tell them why it’s hard for you, and try to bring about out a modified payment plot including the intention of reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At including the intention of point, your creditors have given up on you.

Dealing including Debt Collectors: The Honest Debt Collection Practices Act is the federal law including the intention of dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at bring about if the collector knows including the intention of your employer doesn’t consent of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to bring to a standstill further contact.

Managing Your Auto and Home Loans: Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your automobile for a automobile loan, or your house for a mortgage. If you bring to a standstill making payments, lenders can repossess your automobile or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess your automobile any time you’re in default. No notice is required. If your automobile is repossessed, you may have to pay the balance due on the loan, as well as towing and storage space costs, to make it back. If you can’t do this, the creditor may sell the automobile. If you see default approaching, you may be better off selling the automobile yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report.

If you reduction behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to bring about including you if they believe you’re acting in excellent faith and the situation is temporary. Approximately lenders may reduce or suspend your payments for a small time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Question whether additional fees would be assessed for these changes, and calculate how much they total in the lingering term.

If you and your lender cannot bring about out a plot, contact a housing counseling agency. Approximately agencies limit their counseling services to homeowners including FHA mortgages, but many offer free help to any homeowner who’s having distress making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency virtually you
Credit Counseling and Debt Management Plans

Credit Counseling: If you’re not disciplined enough to make a workable budget and stick to it, can’t bring about out a repayment plot including your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and bring about including you to decipher your financial problems. But be aware including the intention of, just since an organization says it’s “nonprofit,” there’s no promise including the intention of its services are free, affordable, or even legitimate. In fact, approximately credit counseling organizations charge high fees, which may be hidden, or urge consumers to make “voluntary” contributions including the intention of can cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization including the intention of offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be excellent sources of information and referrals.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation including you, and help you develop a personalized plot to decipher your money problems. An initial counseling session typically lasts an hour, including an offer of follow-up sessions.

Debt Management Plans: If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend including the intention of you enroll in a debt management plot (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You must sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you make a budget and teach you money management skills.

In a DMP, you deposit money all month including the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops including you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check including all your creditors to be sure they offer the concessions including the intention of a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Question the credit counselor to estimate how lingering it will take for you to complete the plot. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plot.
Protect Yourself

Be wary of credit counseling organizations including the intention of:

* charge high up-front or monthly fees for enrolling in credit counseling or a DMP.
* pressure you to make “voluntary contributions,” another name for fees.
* won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances.
* try to enroll you in a DMP without spending time reviewing your financial situation.
* offer to enroll you in a DMP without teaching you budgeting and money management skills.
* demand including the intention of you make payments into a DMP before your creditors have accepted you into the program.

Debt Consolidation

You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Remember including the intention of these loans require you to place up your home as collateral. If you can’t make the payments — or if your payments are late — you could lose your home.

What’s more, the costs of consolidation loans can enlarge up. In addition to interest on the loans, you may have to pay “points,” including one point equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages including the intention of are not available including other kinds of credit.
Bankruptcy

Personal bankruptcy generally is considered the debt management option of last resort since the consequences are lingering-lasting and far reaching. People who follow the bankruptcy rules receive a discharge — a court order including the intention of says they don’t have to repay certain debts. But, bankruptcy information (both the date of your filing and the later date of discharge) stay on your credit report for 10 years, and can make it hard to obtain credit, buy a home, make life insurance, or sometimes make a job. Still, bankruptcy is a legal procedure including the intention of offers a fresh start for people who have gotten into financial difficulty and can’t satisfy their debts.

There are two fundamental types of personal bankruptcy: Chapter 13 and Chapter 7. All must be filed in federal bankruptcy court. As of April 2006, the filing fees run about $274 for Chapter 13 and $299 for Chapter 7. Attorney fees are additional and can vary.

Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The lattice effect of these changes is to produce consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows people including a steady income to keep property, like a mortgaged house or a automobile, including the intention of they might otherwise lose through the bankruptcy process. In Chapter 13, the court approves a repayment plot including the intention of allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plot, you receive a discharge of your debts.

Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets including the intention of are not exempt. Exempt property may include automobiles, bring about-related tools, and basic household furnishings. Approximately of your property may be sold by a court-appointed official — a trustee — or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You currently must wait 8 years after receiving a discharge in Chapter 7 before you can file again under including the intention of chapter. The Chapter 13 waiting period is much shorter and can be as small as two years between filings.

Both types of bankruptcy may make divest of unsecured debts and bring to a standstill foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions including the intention of allow people to keep certain assets, although exemption amounts vary by state. Annotation including the intention of personal bankruptcy usually does not erase child support, alimony, fines, taxes, and approximately student loan obligations. And, except you have an acceptable plot to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.
Another major change to the bankruptcy laws involves certain hurdles including the intention of a consumer must clear before even filing for bankruptcy, no matter what the chapter. You must make credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust. Including the intention of is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice including the intention of supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm including the intention of your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at www.usdoj.gov/ust.
Debt Negotiation Programs

Debt negotiation differs greatly from credit counseling and DMPs. It can be very risky, and have a lingering term negative impact on your credit report and, in turn, your ability to make credit. Including the intention of’s why many states have laws adaptable debt negotiation companies and the services they offer. Contact your state Attorney General for more information.
The Claims

Debt negotiation firms may claim they’re nonprofit. They also may claim including the intention of they can arrange for your unsecured debt — typically credit card debt — to be paid off for anywhere from 10 to 50 percent of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay it off including a lesser amount, say $4,000.
The firms often pitch their services as an alternative to bankruptcy. They may claim including the intention of using their services will have small or no negative impact on your ability to make credit in the future, or including the intention of any negative information can be removed from your credit report when you complete their debt negotiation program. The firms usually tell you to bring to a standstill making payments to your creditors, and instead, send payments to the debt negotiation company. The firm may promise to hold your funds in a special account and pay your creditors on your behalf.
The Truth

Just since a debt negotiation company describes itself as a “nonprofit” organization, there’s no promise including the intention of the services they offer are legitimate. There also is no promise including the intention of a creditor will accept partial payment of a legitimate debt. In fact, if you bring to a standstill making payments on a credit card, late fees and interest usually are added to the debt all month. If you exceed your credit limit, additional fees and charges also can be added. This can cause your original debt to double or triple. What’s more, most debt negotiation companies charge consumers significant fees for their services, including a fee to establish the account including the debt negotiator, a monthly service fee, and a final fee of a percentage of the money you’ve supposedly saved.
While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide right information to the credit reporting agencies, including your failure to make monthly payments. Including the intention of can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe. In approximately instances, when creditors win a lawsuit, they have the right to garnish your wages or place a lien on your home. Finally, the Internal Revenue Service may consider any amount of forgiven debt to be taxable income.
Hurt Control

Turning to a business including the intention of offers help in solving debt problems may seem like a reasonable solution when your bills become unruly. But before you do business including any company, check it out including your state Attorney General, local consumer protection agency, and the Better Business Bureau. They can tell you if any consumer complaints are on file about the firm you’re considering doing business including. Question your state Attorney General if the company is required to be licensed to bring about in your state and, if so, whether it is.

Approximately businesses including the intention of offer to help you including your debt problems may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of a debt consolidation loan, failing to clarify certain costs or bring up including the intention of you’re signing over your home as collateral. Businesses advertising voluntary debt reorganization plans may not clarify including the intention of the plot is a bankruptcy filing, tell you all including the intention of’s involved, or help you through what can be a lingering and complex process.

In addition, approximately companies promise you a loan if you pay a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on these advance-fee loan guarantees. They may be illegal. It is right including the intention of many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors never promise including the intention of the consumer will make the loan — or even represent including the intention of a loan is likely. Under the federal Telemarketing Sales Imperative, a seller or tele-marketer who guarantees or represents a high likelihood of your getting a loan or approximately other extension of credit may not question for or accept payment until you’ve received the loan.

You must be cautious of claims from so-called credit repair clinics. Many companies appeal to consumers including poor credit histories, promising to clean up credit intelligence for a fee. But you already have the right to have any inaccurate information in your file corrected. And a credit repair clinic cannot have right information removed from your credit report, despite their promises. You also must know including the intention of federal and approximately state laws prohibit these companies from charging you for their services until the services are fully performed. Only time and a conscientious effort to repay your debts will improve your credit report.

If you’re thinking about getting help to stabilize your financial situation, do approximately homework initially. Find out what services a business provides and what it costs, and don’t rely on verbal promises. Make all in writing, and read your contracts wisely.
For More Information

For more information, see Fiscal Fitness: Choosing a Credit Counselor, at www.ftc.gov/bcp/conline/pubs/credit/fiscal.shtm

The FTC works for the consumer to prevent fraudulent, unrepresentative, and unfair business practices in the marketplace and to provide information to help consumers spot, bring to a standstill, and avoid them. To file a complaint or to make free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

When you are in debt, it seems like whatever the amount of money you owe is just too much. It can become overwhelming and you may start to wonder if a debt consolidation program could help you. Take a small and question yourself these questions:

- Are you struggling to keep up including minimum payments?
- Are your interest rates rising continuously?
- Do your debts keep you awake at night?

If you answer yes to any of these questions and feel like your credit card bills are spiraling out of control then a credit card debt consolidation program may be the best option for you.

Consolidating your debt into a single low-interest monthly payment can save you thousands of dollars and speed the process of paying off debts. And as a bonus, over a period of time you can usually improve your credit score since you will be making consistent monthly payments to your creditors while reducing your debt much quicker.

Credit card consolidation is considered by many experts as the initially step in the process of debt elimination and the prelude to improving your money management skills. After all, once your debt is consolidated your financial worries may not be over. You must make the proper guidance and education on how to better manage your finances so you won’t face more debt in the future.

Who must not consolidate?
Every situation may be different; but there are three things to consider before enrolling:

1. Do you really need to consolidate?
2. Can you still afford the reduced payments?
3. Will consolidation save you time, money or both while paying off your debt?