Think you’re facing difficulties paying your debts? Are you getting dunning notices from creditors? Are your accounts being surrended to loan companies? Are you currently concerned about losing your home or your car?

In case you are receiving collection notices or having trouble making your home or car payment, you are not alone. If the crisis is caused by illness, loss of a job or just overspending, it may be overwhelming. Don’t let your plight go from bad to worse through inaction.

Consider:

• Realistic budgeting
• Credit counseling from a reputable organization
• Debt consolidation
• Bankruptcy

How do you know which could work best for you? It depends on your level of debt, your level of discipline as well as your prospects for the future.

Contacting Your Creditors

Get hold of your creditors immediately if you are having difficulty balancing the budget. Tell them why it’s difficult for you, and attempt to figure out a modified repayment schedule that reduces your payments to a more manageable level.

Dealing with Debt Collectors

The Fair Debt Collection Practices Act dictates how and when a debt collector may contact you. They may not:

• Call you before 8 a.m. or after 9 p.m.
• Call you at work if the collector knows that your employer doesn’t approve of the calls
• Harass or threaten you
• Make false statements
• Use unfair practices, such as deposit a post-dated check, when they try to collect a debt

Debt collectors must honor a written request from you to stop further contact.

Developing a Budget

Taking control of your plight begins with a realistic assessment of your respective budget: How much comes in and how much is spent on a monthly basis. Needless to say, the usual understanding tells us we must spend only equivalent to what we bring home in pay, but it often fails to work out this way in particular if an emergency arises.

Recording your complete expenses – fixed and variable – is a good way to track spending patterns and weed out things that aren’t as essential as rent, car, utilities, food, etc.

Credit Counseling

You may consider contacting a credit counselor if the debts are frustrating you and can’t figure out how to fix it yourself.

Creditors might be prepared to accept reduced payments simply by entering a debt repayment plan with a recognized company. In these plans, you deposit money monthly with the service who then pays your creditors.

Successful plans need frequent, timely payments and might take 48 months (four years) or more to complete. Some companies charge a minute fee or nothing for managing your budget. Others charge a monthly fee which could mount up over time. There’s also credit advice services that are partly funded by creditors so you might not have to pay a fee.

While a debt repayment plan can eliminate a lot of the stress that emanates from combating creditors and overdue bills, it doesn’t mean it is possible to forget about your debts. You still are to blame for:

• Paying any creditors whose debts are not included in the plan
• Reviewing monthly statements from your creditors to make sure your payments have been received
• Making sure that your billing statements reflect any agreement your creditors made to lower or eliminate interest and finance charges, or waive late fees

A debt repayment plan doesn’t erase your negative credit ranking. Accurate details about your accounts can stay with your credit profile for about seven years. A demonstrated pattern oftimely payments, however, can help you get credit in the future.

Auto and Home Loans

Debt repayment plans usually coverunsecured debt. Your auto and mortgage loan, which are considered secured debt, is probably not included. You should keep making payments to these creditors directly.

Most automobile financing agreements allow a creditor to claim your car any time you are in default. No notice is essential. If the car is repossessed, you will have to pay for the entire balance due on the loan, along with towing and storage costs, to get it back. If you cannot do that, the creditor may sell the car. If you see default approaching, you might be more well off selling the car yourself and settling your debt: you’d avoid the added costs of repossession and a negative entry on your credit report.

In the event you fall behind on your mortgage, speak to your lender immediately in order to avoid foreclosure. Most lenders are prepared to talk with you if they believe you’re acting in good faith and also the situation is temporary. Some lenders may reduce or suspend your repayments for a while. Once you resume regular payments, though, you could have to repay 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 relieve the monthly debt.

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