Frequently Asked Questions
If you answer yes to any one of the following questions, you should take action:
- Have you run several credit cards up to the limit?
- Do you frequently make only the minimum monthly payments?
- Do you apply for almost any credit card you are offered–without checking out the terms?
- Have you used the cash advance feature from one card to pay the minimum payment on another?
- Do you use cash advances (or a credit card) for living expenses such as food, rent, or utilities?
- Are you unable to say what your total debt is?
- Are you unable to say how long it would take you to pay off all your current debts (excluding mortgages and cars) at the rate you have been paying?
If you find several of these statements describe your credit habits, it may be that you need to take steps to manage your debt before bill collectors start calling and your credit history is endangered.
What steps should I take if I get into financial trouble?
Here are some specific steps you can take if you are in financial trouble.
Review each debt that creditors claim you owe to make certain you really owe it, and that the amount is correct.
Contact your creditors to let them know you’re having difficulty making your payments. Tell them why you’re having trouble. Try to work out an acceptable payment schedule with your creditors.
Do not wait until your account is turned over to a debt collector. At that point, the creditor has given up on you. As soon as you find that you cannot make your payments, contact your creditors to try to work out a reduced payment plan.
Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and healthcare) and optional expenses (such as entertainment and vacation travel). Stick to the plan.
Try to reduce your expenses. Cut out any unnecessary spending such as eating out and expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.
Use your savings and other assets to pay down debts. Withdrawing savings from low-interest accounts to settle high-rate loans usually makes sense.
Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.
If you are unable to make satisfactory arrangements with your creditors, there are organizations to help you with your financial situation. For instance, Consumer Credit Counseling Service (CCCS) agencies, which are local, nonprofit organizations affiliated with the National Foundation for Consumer Credit (NFCC), provide education and counseling to families and individuals.
To contact a CCCS office for confidential help, look in your telephone directory white pages, or call 1-800-431-8157 for an office near you. To contact the National Foundation for Consumer Credit Counseling and connect with an NFCC Certified Consumer Credit Counselor call 800-388-2227.
Some people with debt problems have found that Debtors Anonymous, General Service Office, PO Box 920888, Needham, MA 02492-0009, 1-800-421-2383 has provided helpful service.
Personal bankruptcy, a serious step, should be considered only if other means have been exhausted, and only if it is the best way to deal with financial problems. A skilled and trusted bankruptcy lawyer should be consulted.
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