You can negotiate your own debt relief plan with your creditors if you want, just follow the steps below: • In a fresh spiral bound notebook, make a list of your total household income. Include everything. Your pay (and your partner's if you have one). Child support if you get it. Disability payments—anything and everything that you receive on a regular basis. • Make a list of your reasonable living expenses (for example, rent or mortgage, food, utilities, clothes, personal hygiene, insurance). The difference between your total income and your total expenses, excluding your debt, is what you have available to devote to paying off your debt. • Make a list of all your debts, including the total amount owed, the minimum payment, the interest rate, and the contact information. • Figure out how much you can realistically pay each creditor each month and call the company to see if they will agree to the plan. Ask to speak to a supervisor. • Tell the supervisor that you are having difficulty paying your debt, that you would like to pay the debt but on different terms, and that if you are unable to negotiate an agreement, you may be forced to consider bankruptcy (in which case the creditor may get nothing). • Request that the company agree to stop charging late fees, that it stop charging interest, and that it agree to accept the proposed amount as payment each month. • Get the name, e-mail, telephone number and address of the individual with whom you are speaking. • After you have reached agreement, immediately send a written confirmation of the conversation detailing the terms of the agreement—and then stick to it. If this sounds like more than you are up to, contact a credit counselor to help you. You can reach the Consumer Credit Counseling Service by calling 1-800-388-2227.
The Fair Debt Collection Practices Act requires debt collectors to treat you fairly and prevents them from engaging in certain types of activities as they attempt to collect the money you owe. A debt collector can contact you in person, by mail, telephone, telegram, or fax between the hours of 8 a.m. and 9 p.m. You can stop a debt collector from contacting you by writing a letter telling them to stop. Once you've done that, the collector can only contact you to notify you that the collector or creditor intends to take some specific action. Just because the calls and letters stop coming doesn't mean the debt has miraculously been wiped clean. You still owe the money, and you should make an effort to pay the debt. If you recently set up a debt relief plan through a credit counseling agency and you are still receiving collection calls, it is possible that the collector has not been made aware of the agreement. Talk to your credit counselor about how best to handle the situation in that case.
Transferring your high interest rate debt to lower rate credit cards may be one way to get some credit card debt relief, but it's not necessarily the best way. However, if you have considered all your other options, such as a home equity line of credit or loan, then by all means transfer away. Just keep in mind that you may end up paying a hefty balance transfer fee so make sure the fee isn't more than any interest savings you'll gain. If you take control of your debt situation, you won't need to seek out debt relief tips. The only way you are going to get ahead of your credit card debt is to pay more than the monthly minimum due. Even though your minimum payment will go down once you've transferred to the lower rate card, keep paying the same amount (or more!) you were paying in the first place. And, if you want to really get serious about paying off your credit card debt, consider setting up a push payment plan. It will save you interest and get you out of debt faster.
If, after listening to numerous debt relief tips, you are considering bankruptcy as a debt relief option, remember that it will stay on your credit report for up to ten years and still may not solve all your financial problems. Certain debts cannot be erased by bankruptcy, including certain taxes, alimony and child support, student loans, and some property settlements. Recently passed laws regarding bankruptcy which go into effect in October 2005, prevents some people from filing for bankruptcy altogether and makes it harder for those who do qualify to come up with manageable repayment plans and provides fewer protections from collection efforts than the prior law. The only way to know for sure if you qualify for bankruptcy and if it is the right choice for you is to seek financial counseling from a qualified consumer credit counselor. To find a certified consumer credit counseling agency in your area, visit the National Consumer Credit Counseling Foundation's Web site.
Debt Relief Tips: A bankruptcy will stay on your credit report for up to ten years, so if you can find some other legitimate means of consumer debt relief, you should probably try that first. However, if after careful consideration you decide to file for bankruptcy, don't despair. There are specific laws that prevent discrimination against someone who has filed for bankruptcy. You can't be denied housing or a job because you filed for bankruptcy, for example. You will be able to get credit again in the future. It may not be as easy, and it almost certainly will be more expensive, but you will be able to apply for and get credit again. Take the following advice: • Demonstrate a steady work history and signs of financial rehabilitation. • Open a savings account, and get a secured credit card. • Don't apply for a bunch of credit cards, either, as each application actually lowers your credit score whether you are accepted or not. • Make regular on-time payments. • Check your credit report regularly to make sure those on-time payments are being reported so you get credit for them. Credit reports can cost up to $20 a pop, but a recently enacted law makes it possible for U.S. citizens to obtain a free copy of their credit report from each of the three major credit reporting agencies once each year. You can request one report from each agency every four months and keep a handle on what's being reported for free. You can order your free annual credit report online at AnnualCreditReport.com, by calling 877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Each year, more than 1 billion people file bankruptcy according to the American Bankruptcy Institute. While some are credit abusers trying to escape their responsibilities, most are normal, everyday, hard working people who have hit upon hard times. The loss of a job, medical bills, or a divorce may be all it takes to tip the scales. Bankruptcy does give debt relief by wiping your debt slate clean, but it is not something to be done lightly. Chapter 7 bankruptcy is used by most individuals. Bankruptcy is a federal court proceeding. From start to finish, it can take anywhere from four to six months. It is almost always necessary to hire a lawyer and may cost you as much as $1,000 in legal fees and other fees. Once you start the process, you may not be able to stop it. While the law does allow you to keep certain basic rights to property in most cases, you may lose the right to keep or use your car, your home, or other personal property depending on your circumstances. Also, if anyone co-signed your loan or credit card, they remain responsible for the debt and will become the target of collection efforts if they haven't already become so. To learn more about bankruptcy and whether it is right for you, visit the American Bankruptcy Institute Web site's consumer education center.
|Jennifer Mathes, Ph.D.|