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Getting Out of Debt

Frequent calls from bill collectors is one sure sign that you have debt problem. If this is the case, it's time to get proactive. Talk to your creditors as soon as possible. You might be incurring additional charges while you wait. Or they might be willing to change your interest rate and save you money.

Here are some tips for talking with creditors:

• Be cooperative, not angry.
• Be prepared with a list of how much you owe.
• Have all your financial records together and with you.
• Listen. The bill collector might have ideas that will help you.
• If you are having trouble with a particular bill collector, ask if you can speak with a different person.

Your Rights
Creditors do not have the right to harass you. The Fair Debt Collection Practices Act is a federal law that protects you. It forbids collectors from:

• The use of threat of violence or other criminal means to harm a person, their reputation or property
• The use of obscene or abusive language
• Repeated calls with intent to annoy or harass
• False affiliation with the government, including the use of a badge or uniform
• Threat of arrest
• Communication at unusual or inconvenient places and times
• Communication with third parties without debtor consent

Bankruptcy
Bankruptcy is a way to eliminate debts or repay them under court protection and supervision. Child support payments, alimony, fines, taxes, and some student loan obligations are typically not eliminated.

Bankruptcy was created to give a hopeless debtor a fresh start and should always be considered a last resort. A bankruptcy will stay on your credit report for up to 10 years, possibly affecting your ability buy or rent a home and will likely result in higher interest rates on future loans.

Types of Bankruptcy
There are many different types of bankruptcy, but the most common are Chapter 7 and Chapter 13.

In a Chapter 7, or "straight bankruptcy," you agree to turn over all of your non-exempt assets to a Chapter 7 trustee. The trustee then sells your assets and distributes the money to your creditors.

Chapter 13, or "reorganization," allows you to keep your property, such as a mortgaged house or car. It includes a plan based on disposable income to pay creditors over three to five years with a single monthly payment.

Credit Counseling
Credit counseling agencies can help you get a handle on your debt. They:

• Review your debt load and income
• Help you set up a realistic personal budget
• Negotiate with creditors for reduced payments on bills
• Assist with planning for future expenses

To learn more about these agencies, or to find one in your area, visit the National Foundation for Consumer Credit at www.nfcc.org.