How to Manage Bad Debt - Having trouble 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 car?
Learn About Debt Management Plans - Reputable credit counseling organizations employ counselors who are certified and trained in consumer credit, money and debt management, and budgeting. Those organizations that are nonprofit have a legal obligation to provide education and counseling.
Contact Your Creditors - Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.
About Credit Counseling - If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which may be hidden, or urge consumers to make “voluntary” contributions that can cause more debt.
Personal bankruptcy generally is considered the debt management option of last resort because the results are long lasting and far reaching. People who follow the bankruptcy rules receive a discharge a court order that says they don’t have to repay certain debts. However, 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 difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can’t satisfy their debts.