Thousands of people have trouble paying their bills, are getting dunning notices from creditors or have their accounts being turned over to debt collectors.

Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn't have to go from bad to worse.

In this situation the following options can be considered: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt negotiation is yet another option. How does one know which will work best? It depends on the level of debt, the level of discipline, and one's prospects for the future.

This covers the first option, Realistic Budgeting (Self Help)

Self-Help

Developing a Budget: The first step toward taking control of a financial situation is to do a realistic assessment of how much money one takes in and how much money is spend. A good start is to list income from all sources. Then, one should list the "fixed" expenses - those that are the same each month - like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary - like entertainment, recreation, and clothing. Writing down all expenses, even those that seem insignificant, is a helpful way to track spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure one can make ends meet on the basics: housing, food, health care, insurance, and education.

Public libraries and bookstores have information about budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing a checkbook, and creating plans to save money and pay down debt.

Contacting Creditors: Contact creditors immediately if having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. One should never wait until accounts have been turned over to a debt collector. At that point, creditors have given up on you.

Dealing with Debt Collectors: The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact a person. A debt collector may not call anyone before 8 a.m., after 9 p.m., or while one's at work if the collector knows that an employer doesn't approve of the calls. Collectors may not harass people, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from an individual to stop further contact.

Managing Auto and Home Loans: Debts can be unsecured or secured. Secured debts usually are tied to an asset, like a car for a car loan, or a house for a mortgage. If one stops making payments, lenders can repossess a car or foreclose on a house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess a car any time one's in default. No notice is required. If a car is repossessed, one may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If one can't do this, the creditor may sell the car. If one sees default approaching, one may be better off selling the car personaly and paying off the debt: This avoids the added costs of repossession and a negative entry on a credit report.

If one falls behind on a mortgage, contact the lender immediately to avoid foreclosure. Most lenders are willing to collaborate if they believe one's acting in good faith and the situation is temporary. Some lenders may reduce or suspend payments for a short time. When one resumes regular payments, though, one may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If a person and a lender cannot work out a plan, contacting a housing counseling agency could be wise. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who's having trouble making mortgage payments. One can call the local office of the Department of Housing and Urban Development or the housing authority in a state, city, or county for help in finding a legitimate housing counseling agency.

People thinking about getting help to stabilize their financial situation, need to do some homework first. They should find out what services a business provides and what it costs, and don't rely on verbal promises. Get everything in writing, and read contracts carefully.

Good Luck!


About the author:
Bruno P. Scott is the editor of Emergency Debt Relief Online where you can get the information and resources you need about debt relief, consolidation, credit counseling and more.


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