Debt and Bankruptcy
Credit and Debit Cards
Debt Consolidation

What should you do if you are deep in debt?


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It depends on whether your debt is secured or unsecured. Unsecured debt is when your debt is not tied to any asset. Examples are credit card debts, credit lines, unsecured personal loans, etc. If your debt is unsecured, you should avail of the reliable services of a professional credit counselor. They will help you assess your personal financial situation and provide you with several options to choose from. Declaring bankruptcy should be a last resort. Through their connections with creditors, they are able to consolidate your debts in such a way that you will wind up paying less than you did if you were to pay off your debts yourself. They also provide valuable services to educate the public about personal financial management, with tips that will help you balance your budget every month. Many of these services are free of cost or require you to pay a nominal fee.


Whethwer it is caused by personal or family illness, the loss of a job, or simple overspending, a financial crisis can seem overwhelming, but often can be overcome. Your financial situation doesn't have to go from bad to worse.

Consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

The first step toward taking control of your financial situation and recovering from bad credit and debt is to do a realistic assessment of how much money comes in and how much money you spend.

Start by listing your income from all sources. Then, list your "fixed" expenses � those that are the same each month � such as your mortgage payments or your rent, car payments, or insurance premiums.

Next, list the expenses that vary, such as entertainment, recreation, or clothing. Writing down all your expenses � even those that seem insignificant � is a helpful way to track your spending patterns, identify the expenses that are necessary, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Your public library has information about budgeting and money management techniques. Low cost budget counseling services that can help you analyze your income and expenses and develop budget and spending plans also are available in most communities. Check your Yellow Pages or contact your local bank or consumer protection office for information about them. In addition, many universities, military bases, credit unions, and housing authorities operate nonprofit counseling programs.

Contact your creditors immediately if you are 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, the creditors have given up on you, and your bad credit rating will get worse.

The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or at work if the collector knows that your employer doesn't approve of the calls. Collectors may not harass you, make false statements, or use unfair practices when they try to collect a debt. Debt collectors must honor a written request from you to cease further contact.


Don't panic; sit down somewhere quiet and review your income and expenditure.

Start by listing your income from all sources, including any tax credits or benefits you may receive. Then, list your priority expenses, such as your mortgage payments or your rent, utility bills, food etc. Next, list all your none essential expenditure, but don't include any repayments to your unsecured creditors at this stage. Once you have listed all your expenditure, add it up and take the total away from your total income, the result is your disposable income.

If your disposable income is insufficient to make your required unsecured debt repayments, you need to seek further help.

Information about budgeting and money management techniques can be found from a variety of sources, including the internet and public libraries. Many organisations offer free advice; be wary of any that charge a fee. Details of organisations that offer free advice can be found on the Insolvency Service website.