Getting Yourself Out Of Debt

Many people have gotten themselves deep into debt... Has this happened to you?

Unfortunately, it is easy to get into debt. Getting yourself out of debt is possible, but it is going to take some work on your part. The Federal Trade Commission (FTC) is a government agency that helps protect consumers in America. We have provided you with a concise and easy to understand summary from the FTC on how you can get out of debt and stay out of debt.

If you are deep in credit card debt, having a difficult time paying your bills, behind on your mortgage or vehicle loans, or being contacted by debt collectors, you need help getting out of debt. The important thing to remember is that you can take control of your financial situation and you can keep from sliding deeper into debt.

If you are in debt, you should consider the following options:

1. Realistic budgeting

2. Credit counseling from a respected organization

3. Debt consolidation

4. Bankruptcy

5. Debt settlement

Deciding which options work best for your depends upon how deep you are in debt, how disciplined you are, and your future plans.

You can start getting out out of debt by taking certain steps by yourself. In some cases you might need the assistance of professional debt relief services.

Steps You Can Take

Create a budget - One of the first things you need to do is develop a realistic budget. Write down how much money you earn and how much money you spend. When creating your budget, just follow these steps:

1. List your income from all sources (paycheck, rental income, commissions, government benefits).

2. List your fixed monthly expenses (mortgage, rent, car loans, insurance premiums).

3. List your varied expenses (food, recreation, entertainment, clothing, travel)

Make sure that you write down all of your expenses. This is a good way to understand how you are spending your money so you can identify the important expenses and rank the other expenses. Your goal is to make sure you can meet your basic needs like food, housing, health care, education, and insurance.

It is easy to find additional information on budgeting on the Internet or at the library. There are also some very easy to use computer software accounting programs that make your budgeting and management of your finances easier.

Contact Your Creditors - As soon as you realize that you are having financial difficulties, contact your creditors. Tell them why you are having trouble making your payments and ask if they can develop a modified payment plan. This can reduce your payments to a level that you can manage. Do not wait until your accounts are turned over to a debt collection agency. If that occurs, it means that your creditors have given up on you and they are letting the debt collectors deal with you.

Debt Collectors - If you are being contacted by debt collectors, the Fair Debt Collection Practices Act does provide you some protection on when and how debt collectors can contact you. Debt collectors can not call you before 8 a.m., and after 9 p.m., or while you are at work if the debt collector knows your employer does not approve of the phone calls. Debt collectors may not lie, harass you, or use unfair practices when trying to collect a debt. Finally, they must honor a written request from you to stop any future contact.

Taking Care Of Your Home Mortgage And Vehicle Loans - Your debts are classified as either secured or unsecured. Unsecured debt is not tied to any assets and these include your credit card debt or medical bills. Secured debt is tied to an asset and this includes your vehicle and home mortgage. If you stop making payments on your secured debt, your lenders can reposess your vehicle or foreclose on your home.

If you get behind on your mortgage, contact your mortgage lender immediately to avoid foreclosure. If you are willing to work with your lender and if your difficult financial situation is temporary, most lenders will try to work with you. Some lenders might even greatly reduce or even suspend your payments for a short period of time. You will never know unless you ask them. When you begin making your regular mortgage payments again, you might have to make additional payments to make up the past due amount. Some mortgage lenders might even restructure the mortgage to allow for a longer repayment period to reduce your monthly debt. Be sure to ask if there are any additional fees that will be charged to make any changes. You will need to determine if any additional fees will make the mortgage changes worthwhile.

If you are unable to work out a mortgage plan with your lender, than you should contact a housing counseling agency through the Department of Housing and Urban Development (HUD) or your local housing authority. They can help you find the services of a reliable housing counseling agency.

A majority of the vehicle lending agreements allow the creditor to reposess your vehicle anytime you get behind on your payments. They do not have to notify you. If your vehicle is repossessed, in order to get it returned, you may have to pay the balance on the loan and the towing and storage fee. If you are unable to meet these requirements, the lender can sell your vehicle. If you know that you can't make your vehicle payments and are in default, you should sell the car yourself and pay off your debt. This will help you avoid paying the repossession costs and a negative comment on your credit report.

Getting Professional Assistance

If you are unable to put together a workable budget, can't come to an agreement with your creditors, your bills continue to pile up, and you keep sliding deeper into debt, you should consider getting some professional debt assistance.

There are several different options you can take when dealing with overwhelming debt. Before you make any final decisions, be sure to understand what you are doing because it could have a big impact on your ability to get credit in the future or it might cost you more money in the long run.

Debt Relief Services - If you are not able to create a realistic budget, can't keep up with your bills, or are unable to work with your creditors to restructure a repayment plan, then you may need help with credit counseling.

Try to find a credit counseling organization that is truly nonprofit and provides you services for free. There are some credit counseling organizations that claim to be nonprofit, but may end up charging you hidden fees or ask you to contribute voluntarily to their organization.

Credit couseling organizations that have good reputations can help you develop a budget, provide you with advice on managing your mooney and your debts, and provide you useful information and workshops. The credit counselors will talk with you about your financial difficulties and work with you to produce a financial plan that will help reduce your financial problems.

In addition to general credit counseling, some companies offer credit card debt counseling that helps you get your use of credit cards under control.

Debt Management Plans - If you have too much debt that you are unable to pay, a credit counseling organization may suggest you look at a Debt Management Plan (DMP). Debt management plans are not for everyone that is having financial problems. You should use the services of a certified credit counselor to determine if the DMP is your best option.

When you develop a debt management plan, you deposit money every month with a credit counseling organization. The credit counselor then uses your money to make montly payments on your unsecured debts like credit cards, medical bills, and student loans. Your credit counselor may be able to negotiate lower interest rates and better repayment terms. Make sure you ask your credit counselor how long it might take to complete your DMP. In some cases, it can take you up to 4 years to complete the plan. Depending upon the severity of your financial situation, you might not be able to get any additional credit while you are completing the plan.

Debt Settlement Programs - You have probably heard a lot of advertisments from debt settlement companies that claim they can negotiate with your creditors to reduce the amount of debt that you owe. You need to be aware that debt settlement is different from credit counseling and debt management plans, debt consolidation, and even bankruptcy. Debt settlement programs can be very risky, can damage your credit report, and have the potential to affect your ability to get credit in the future.

Debt Consolidation - You might be able to get yourself out of debt through careful debt consolidation. A common way to consolidate debt is to take out a second mortgage on your home, or get a home equity loan. The main concern with putting up your home as collateral is that you could lose your home to foreclosure if you are unable to make the payments.

The cost of consolidation loans can cost you more money depending on the interest rate and if you have to pay extra points to borrow the money. There are some tax advantages to consolidation loans that might help your financial situation. Learn more to determine if debt consolidation is the right choice for you.

Bankruptcy - A final option for managing your debt is through bankruptcy. Before you consider bankruptcy you will want to examine and exhaust the other options. The results of bankruptcy can affect you for a long time. If you follow the bankruptcy rules, the court will order that you don't have to repay your some of your debts.

Bankruptcy information stays on your credit report for 10 years and that can make it hard for you to buy a home, get credit, get life insurance, and in some cases be selected for a job. If you are deep in financial trouble and can not pay your debts, bankruptcy can provide you with a new beginning.

There are two types of bankruptcy that a person may file. They are Chapter 7 and Chapter 13, and most be filed in federal bankruptcy court. It costs several hundred dollars to file. Learn more about bankruptcy and finding a bankruptcy attorney to represent your interests.