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Managing Your Debts
How to Regain Financial Health

... Continued From Previous Page

What Others Can Do For You

Credit Counseling and Debt Management. If you are unable to make satisfactory arrangements with your creditors, there are organizations that can help. Nonprofit consumer credit counseling and debt management agencies provide education and counseling to families and individuals. For consumers who want individual help, counselors with professional backgrounds in money management and counseling can provide support. A counselor will work with you to develop a budget to maintain your basic living expenses and outline options for addressing your total financial situation.

If creditors are pressing you, a credit counselor can also negotiate with these creditors to repay your debts through a debt management plan. Under this plan, creditors often agree to reduce payments, lower or drop interest and finance charges, and waive late fees and over-the-limit fees. After starting the plan, you deposit money with the debt management agency each month to cover the negotiated payment amounts. The agency will distribute this money to your creditors to repay your debts.

Supported mainly by contributions from community organizations, financial institutions, and merchants, nonprofit consumer credit counseling agencies provide services free or at a low cost to individuals seeking help. To contact a credit counseling agency, look in your telephone directory white pages, or if you prefer confidential assistance from the comfort of your home, check out the various resources on our site.

Personal Bankruptcy. Bankruptcy is a legal procedure which can give people who cannot pay their bills a fresh start. A decision to file for bankruptcy is a serious step. You should make it only if it is the best way to deal with financial problems.

There are two types of bankruptcy available to most individuals:

Chapter 13 or "reorganization" allows debtors to keep property which they might otherwise lose, such as a mortgaged house or car. Reorganizations may allow debtors to pay off or cure a default over a period of three to five years, rather than surrender property.

Chapter 7 or "straight bankruptcy" involves liquidation of all assets that are not exempt in your state. The exempt property may include items such as work-related tools and basic household furnishings, among others. Some of your property may be sold by a court-appointed official or turned over to your creditors. You can file for Chapter 7 only once every six years.

Both types of bankruptcy may get rid of unsecured debts (those where creditors have no rights to specific property), and stop foreclosures, repossessions, garnishments, utility shutoffs, and debt collection activities. Both types also provide exemptions that permit most individual debtors to keep most of their assets, though these "exemption" amounts vary greatly from state to state.

Bankruptcy cannot clean up a bad credit record and will be part of this record for up to ten years. It can, for example, make it more difficult to get a mortgage to buy a house. It usually does not wipe out child support, alimony, fines, taxes, and some student loan obligations. Also, unless under Chapter 13 you have an acceptable plan to catch up on your debt, bankruptcy usually does not permit you to keep property when the creditor has an unpaid mortgage or lien on it.

Bankruptcy cases must be filed in federal court. The filing fee is $160, which sometimes may be paid in installments. This fee does not include the fees of your bankruptcy lawyer.

Choosing a bankruptcy lawyer may be difficult. Some lawyers make easy money by handling hundreds of bankruptcy cases without adequately considering individual needs. Recommendations from those you know and trust, and from employee assistance programs, are most useful.

For a FREE Bankruptcy Evaluation, call 877-828-0606.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act prohibits a debt collector from showing what you owe to anyone but your attorney, harassing or threatening you, using false statements, giving false information about you to anyone, and misrepresenting the legal status of your debts. Remember that under other federal laws to collect debts, creditors cannot seize most government assistance and can only garnish a portion of wages to collect debts.

A Final Word

Don't lose hope, even if you despair of ever recovering financially. You can regain financial health if you act. Pursuing the options presented in this article can put you on the road to financial recovery.

 


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