Help for Debt Problems

According to the United States Federal Reserve, 45 percent of households in America spend more each month that what they earn. This cycle has created a debt problem for many American families, who are often unable to keep their heads above water. Getting out of debt, or even managing it, is difficult. It requires financial discipline and patience.

Develop a Strict Budget

Strict budgeting will usually take care of debt problems, provided they are not too severe. Create a workable budget for your household, and dig deep for hidden money pits. Money pits are usually small but frequent transactions that together cost a substantial amount of money. Common money pits are alcohol, soft drinks, cigarettes and fast food. Making a strict budget can help you identify negative spending habits that you cannot afford when in debt. Eliminate these items from your budget, or replace them will less-expensive alternatives.

The more money you can trim from your monthly budget, the more money you can put towards paying down your debt and removing the black cloud over your head.

Seek Credit Counseling

Credit counselors can help you make a workable budget for your household, or help you enroll in a debt management plan if you cannot afford your expenses.

Be selective when dealing with credit counseling agencies. Only work with agencies approved by the federal government. Just because an agency claims to be non-profit, does not mean its services are free or reasonably priced. See the Resources section below for advice regarding credit counselors from the Federal Trade Commission.

Bankruptcy

Bankruptcy is the last alternative to debt problems. It should only be done after every other alternative has been tried. Bankruptcy will help you liquidate your debt through asset sales (Chapter 7) or help you consolidate and repay your creditors (Chapter 13).

Bankruptcy will negatively affect your credit for 10 years. While it is not impossible to recover from bankruptcy, it is difficult. The bankruptcy filing also becomes public record, and the details of your case are available to anyone. Nevertheless, bankruptcy is a way to get out of debt and get a fresh start.