Get help right away
If you find yourself with a lot of debt and can't seem to come up with a plan, try these steps to get your finances back on track.
- Admit there's a problem that is out of control. Act now!
- Verify your debts. Review what creditors claim you owe to make certain you really owe them. If you dispute a debt, contact the creditor directly to resolve your questions. If you still have questions, contact your state or local consumer protection office or state Attorney General.
- Prioritize your debts. Protect your home first. Credit card and medical debt can wait if necessary.
- Call your creditors now and explore bill-paying options. Explain why you're having trouble, and try to work out an acceptable payment schedule.
- Itemize your household and living expenses. Highlight the essentials - housing, utilities, transportation to work, etc. Create a spending plan that allows you to reduce your debt, and then stick to the plan.
- Try to reduce your expenses. Cut out unnecessary spending, consider public transportation, clip coupons, purchase generics, and avoid impulse purchases. Above all, stop incurring new debt.
- Use your savings and other assets to pay down debt. Withdraw low-interest savings to settle high-rate loans. Sell a second car to provide cash and also reduce insurance and other maintenance expenses.
- Look for additional resources from governmental and private sources for which you may be eligible. Government assistance may include unemployment compensation, Aid to Families with Dependent Children, food stamps, low-income energy assistance, Medicaid, and Social Security including disability. Other resources may be available from churches and community groups.
- If absolutely necessary, and your income situation has now improved and you just need to catch up on your prior debt, refinance your credit card debt with a home equity loan. If your situation has not improved, or this is not an option, see the next steps.
- If you live on a low, fixed income, consult a legal aid society and learn your rights.
- If you can begin a debt repayment plan, work with an accredited nonprofit credit-counseling agency in your state.
- Get professional help. This could include personal bankruptcy.