When you owe money to someone, you are in debt. Owing money is not always bad.
You might have a loan. You might use a credit card. If you do, you might be in debt.
But if you pay your bills when they are due, it might help your credit history.
Debt is bad when you owe money you cannot pay back. Debt collectors might call you. You might have legal problems if you cannot pay back the money.
Sometimes, debt can hurt your credit history. For example:
These things can hurt your credit history.
You can do some things yourself. A credit counselor can help you. Credit counselors can help you make a budget. Credit counselors also can help you make a plan to repay your debts.
Debt relief services companies might offer to help. These companies are different from credit counselors. They might charge you high prices. And they might not really help.
Debt collectors try to collect money you owe to someone else. Debt collectors must follow rules when they call you. If they do not follow the rules, you can complain about them to the Federal Trade Commission.
You can ask a debt collector to stop calling you. Legally, they must stop. If they do not, you can report them to the Federal Trade Commission.Read more
Start by making a budget. Write down how much money you make every month. Write down how much you spend every month. Include:
Look for ways to spend less money. You might not find ways to save. But it helps to write down what you spend. Then you can make a budget.
Learn more about making a budget.
Call the companies you owe money to. Explain why you have trouble paying your bill. Ask for a “payment plan.” Some companies might let you pay less every month until you have repaid all the money.
Call the company before it sends your debt to a debt collector. Many debt collectors will not accept a payment plan.
Credit counselors can help you make a budget. Credit counselors also can help you plan to repay your debt.
A good credit counselor will spend time with you. The counselor will ask you all about your finances. A good counselor will:
A good counselor will not:
Look for a credit counselor you can meet in person. Look here first:
These groups sometimes have credit counselors who charge low fees to help you.
When you find a credit counselor, ask questions. Choose a counselor who can help you make a budget. Choose a counselor who also can help you plan to stay out of debt.
Some counselors might suggest a “debt management plan” as your only choice. Others might talk about a “debt settlement plan.” If they do either of these things, go somewhere else.
A “debt management plan” is one way to repay money you owe. Here is how it works:
Debt management plans might help some people. These plans do not help everyone. A good credit counselor can help you decide what might help you.
Some people say a “debt settlement plan” is a way to repay money you owe. But many companies that offer these plans make promises they cannot keep.
Some companies say:
Many people who use debt settlement plans find they owe more money, not less. These companies charge you a lot of money, and then they do not help you.
A debt collector is someone who tries to collect money owed to someone else.
The company you owe money to hires a debt collector. The debt collector only makes money if he gets money from you. The debt collector starts calling you to get that money. If the debt collector does not get the money, he might take you to court.
A law gives rules for debt collectors. The law says that debt collectors:
The law also says debt collectors must send you a written notice about your debt. This is called a “validation notice.” The notice must say:
The government gets complaints from thousands of people about debt collectors. Some of the complaints say debt collectors:
In case a debt collector calls:
Then you have a record if you need to complain, or if you need to go to court to defend yourself.
Do you want the debt collector to stop calling you? You must send a letter telling the debt collector to stop calling. The law says he must stop calling you then.
If a debt collector breaks the law, file a complaint. The Federal Trade Commission tries to catch debt collectors who break the law.
You can help. Report bad debt collectors to the Federal Trade Commission at 1-877-382-4357.
Stopping calls does not mean the debt goes away. The debt collector might still sue you to collect money. If you are being sued, you should get a notice in the mail. Sometimes, this is called a “summons.”
In a lawsuit, the debt collector usually asks the court to:
The court might even tell your employer to take money out of your paycheck until you repay what you owe. This is called “garnishing” your wages.
Do not ignore notices about a lawsuit. If you do not go to court, you automatically lose.Read more
If you owe money you cannot repay, you need a plan. Do not ignore the problem. There are people who can help you.
Look for a credit counselor who will meet you in person. Then ask questions. These questions will help you select a counselor:
Look for a credit counselor who can do the most for you. You might have to pay some money for help. But a good credit counselor will not ask you to pay in advance.
When you talk to a debt collector:
When you get the validation notice:
If you want the collector to stop calling:
If that debt collector still calls, file a complaint. Call the Federal Trade Commission at 1-877-382-4357.Read more