Lots of people get in over their heads. Many times it's the result of a series of poor decisions or because a business fails. Other times it's due to circumstances beyond the debtor's control. Regardless of the reason, debt problems can wreak havoc on your finances, your emotions and even your marriage and family. Fortunately, there are resources that can help you deal with your debt problems.
Credit Repair Organization Act
Congress passed the Credit Repair Organization Actin 1996 to ensure individuals receive accurate information from credit counseling and repair organizations about the nature of the counseling organization's business. Credit repair organizations are not allowed to suggest that they will erase legitimate credit information or start a new credit file for you. They are also prohibited from charging a fee until they have rendered all promised services.
Credit Counseling Services
Credit counseling services can be for profit or nonprofit. They frequently provide confidential counseling and advice on budgeting and help you negotiate a favorable settlement with creditors. On occasion, they negotiate on your behalf, and provide you with a consolidation loan to help lower your payments, lower your interest, or pay down your debt faster. Do your homework before committing to one of these organizations (see Resources).
Financial Planners
Many financial planners provide confidential help with budgeting and advice. Some charge commissions on purchases of financial products, while others charge a flat rate or hourly fee. A skilled financial planner provide a great deal of perspective to your financial habits and help you address the root causes of your debt.
Bankruptcy
Bankruptcy is the court-supervised process of liquidating or reorganizing an individual's or business's assets in order to satisfy the claims of creditors. Chapter 7 governs liquidation and discharge, and Chapter 13 governs reorganizing an individual's assets and working out a payment plan. If the situation is hopeless, you may be able to get relief under the bankruptcy code and have some or all of your debt discharged. Not all debts are able to be discharged in bankruptcy, though. Bankruptcy can have serious long-term effects on your credit and even your career. Consult an experienced bankruptcy attorney before you file to learn how bankruptcy may apply in your specific situation.
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