If you're in financial trouble, you should first pay your rent or mortgage, your basic needs such as food and your car payment, advises the Connecticut Network for Legal Aid. Once creditors are constantly calling, you probably need legal assistance such as a debt management plan or some type of bankruptcy. Also, if you're the victim of debt collector harassment or identity theft, you may need to consult with a local attorney or legal assistance office.
Debt Management Plans
Debt management plans are usually administered through a nonprofit credit counseling agency, according to the Federal Trade Commission. You would meet with a certified credit counselor to discuss your budget and existing debts, such as credit card bills, personal loans and medical obligations. The counselor will then negotiate reduced payment terms with your creditors. You would pay one lump sum monthly, including a modest administrative fee, to the credit counseling agency. But some credit counselors do not properly distribute payments; also you cannot get any new credit while under a debt management plan.
General Legal Assistance
Even if you owe tens of thousands of dollars, debt collectors must follow the federal Fair Debt Collection Practices Act. If you are being sued for debts that are not yours, being threatened with physical harm or receiving collection calls at unusual hours you should consult with a lawyer or legal assistance office. Collection representatives cannot legally call you outside of the hours of 8 a.m. to 9 p.m. in your time zone and must stop all calls if you write them a letter demanding they cease telephone contact.
Chapter 7 Bankruptcy
If you meet economic qualifications, you potentially qualify for bankruptcy relief, according to the book "How to File for Chapter 7 Bankruptcy." Chapter 7 permanently eliminates your obligation to pay many pre-existing debts, excluding bills such as recent taxes and child support. Generally, you must earn no more than your state's annual median income level to qualify. As of 2011, the annual median income level for a single Virginia resident was $50,296, while the yearly median income figure for a family of four in Texas was $65,477, according to the U.S. Trustee Program.
Chapter 13 Bankruptcy
Chapter 13 enables struggling debtors to partially repay their debts under court supervision. Chapter 13 filers cannot legally get new credit while repaying their debts; it usually takes three to five years to complete Chapter 13. Like other types of bankruptcy, debtors cannot include debts related to recent taxes, familial support or the commission of a crime.
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