it happens. Even when you truly try to manage your money well, you find
yourself in a situation where you can't pay all your bills. Perhaps you've
lost your job. Or maybe you've had some emergency expenses.
Things may seem rough, but there are ways of handling the problem. There
are things you can do immediately to limit the damage. You can also restructure
your debt with the help of Credit Counselors.
Or, as a last resort, you can declare bankruptcy.
creditors are phoning you and the money doesn't seem to stretch far
enough, it's easy loose your head. Here are a few simple rules to keep
things from getting worse.
Survival Rule #1 Don't wait until things get totally out of hand.
Take action as soon as you see a problem developing.
Survival Rule #2 Cut up those credit cards. Don't borrow on them
to pay bills you can't pay. It will only escalate the problem.
Survival Rule #3 Don't bounce checks. In some states, bouncing
a check is a worse crime than not repaying a debt. If you can't pay,
be honest with your creditor.
Survival Rule #4 Consider debt consolidation
Survival Rule #5 Call your creditor(s) and try to work something
out. Your creditors know that if you have to declare bankruptcy, they
may not see a single penny of the amount you owe them. They have a vested
interest in making an arrangement with you that protects their money.
Survival Rule #6 Go to a credit counselor.
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consolidation is a way of reducing your total monthly payments on your
outstanding loans and credit cards.
How It Works
Debt consolidation is a loan to pay off other loans. You total your outstanding
obligations and receive a lump sum to pay them off.
You then have a new loan, the principal of which is the total of the previous
obligations. You make monthly payments on that new loan<\->essentially
trading several payments a month of just one, lower payment.
Things To Be Aware Of
While debt consolidation can make your monthly payments more manageable,
it can also be the most costly type of loan. This is because you end up
paying higher interest... or paying over a longer term. Either will increase
the total amount it costs you to borrow. So you need to shop wisely for
a debt consolidation loan.
You're also still vulnerable to another danger. Many people, after they've
consolidated their debts to a comfortable level just go on borrowing.
Before they know it, they're back where they started. Unless you're ready
to put a curb on your spending, debt consolidation will not solve your
Tips To Make Debt Consolidation Work In Your Favor
Tip 1: Call a halt to spending! Cut up those credit cards-or put them
away and don't use them except for emergencies.
Tip 2: Shop wisely for a debt consolidation loan. Look for an interest
rate lower than what you're paying and a term no longer than your current
are credit counselors in every city in the U.S. You can find them in the
Yellow Pages under "Credit and Debt Consulting Services." Some
are privately run; others are non-profit organizations. All are dedicated
to helping people with financial difficulties manage their debts and repay
the money they owe.
They work with you and your creditors to arrange a payment schedule that
allows you to repay your debts on the income you have. In return, your
creditors agree to take no further action, provided you keep to your commitment.
Credit counseling is an excellent way to avoid the stigma of bankruptcy.
Creditors like it because they get their money. Debtors like it because
it protects their credit rating, while taking some of the pressure off
The Consumer Credit Counseling Service is probably the most widespread
and best known of these organizations. It is non-profit. Their services
are free, although, if you work out a repayment schedule through them,
they may charge a small fee to administer it. For an office near you call
As A Last Resort
all other avenues of relief fail, you may find you find yourself forced
This is a last resort. If you declare bankruptcy, it goes on your credit
history. It will be almost impossible to obtain credit for 7-10 years,
depending on the type of bankruptcy you declare.
Chapter 7 allows you to totally wipe off the majority of your debts. You
also lose all your assets, except for a small portion protected by law.
Some debts can not be eliminated by Chapter 7. These include child support,
alimony, student loans guaranteed by the government and income taxes for
the previous 3 years. This type of bankruptcy remains on your credit record
for 10 years.
Chapter 11 allows you to restructure your debts by establishing a schedule
to pay them off over time. You get to keep your assets and your creditors
agree not to take any further action, as long as you keep to the payment
schedule. This type of bankruptcy remains on your credit record for 7