How to Get out of Debt When Your Credit Is Awful & You Have No Money

Your credit is destroyed when you have high debt and no money to make even the minimum payments. Credit score compiler FICO explains that delinquent payments, accounts placed with collection agencies and charge-offs all make your credit score plunge. Bankruptcy gets you out of debt if you have no other way to get rid of your bills, but the Federal Trade Commission explains that a 2005 law imposes certain steps for the process. You must follow the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act before you can escape your debt.

Instructions

1

Sign up for pre-bankruptcy credit counseling through a firm approved by the Department of Justice U. S. Trustee Program. There are approved programs in every state but Alabama and North Carolina. In those states, the courts approve credit counseling firms, according to the FTC.

2

Complete the credit counseling program. The FTC explains that you get it free of charge if you cannot afford a fee, but you must request a waiver before the session. You can do it in person, online or through a phone call. It runs 60 to 90 minutes and includes a discussion of your finances, budgeting information and discussion of bankruptcy alternatives.

3

Obtain a certificate of completion for the credit counseling program. You need it to go through with bankruptcy if the credit counselor was unable to help you come up with other viable options.

4

Discuss your bankruptcy options with a lawyer. You must pay attorney fees, but the lawyer will help you choose the best type of bankruptcy for your personal situation and handle the legal process. The FTC advises that you will either file Chapter 7 bankruptcy, which forces liquidation of most large assets and gets rid of virtually all debts or Chapter 13 bankruptcy, which lets you keep more possessions but requires certain repayments.

5

Complete the required post-filing debtor education program required under the Bankruptcy Abuse Prevention and Consumer Protection Act. Fill out a request for waiver if you cannot pay the fee. The FTC explains that this program lasts about two hours and teaches financial management skills that will help you rebuild your credit and avoid future problems. You will receive a completion certificate.