Financial Trouble: Frequently Asked Questions

HOW CAN I TELL WHETHER I HAVE TOO MUCH DEBT?

If you answer yes to any one of the following questions, you should take action:

If you find several of these statements describe your credit habits, it may be that you need to take steps to manage your debt before bill collectors start calling and your credit history is endangered.

WHAT STEPS SHOULD I TAKE IF I GET INTO FINANCIAL TROUBLE?

Here are some specific steps you can take if you are in financial trouble.

  1. Review each debt that creditors claim you owe to make certain you really owe it, and that the amount is correct.
  2. Contact your creditors to let them know you’re having difficulty making your payments. Tell them why you’re having trouble. Try to work out an acceptable payment schedule with your creditors.
  3. Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and healthcare) and optional expenses (such as entertainment and vacation travel). Stick to the plan.
  4. Try to reduce your expenses. Cut out any unnecessary spending such as eating out and expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.
  5. Use your savings and other assets to pay down debts. Withdrawing savings from low-interest accounts to settle high-rate loans usually makes sense.

Personal bankruptcy, a serious step, should be considered only if other means have been exhausted, and only if it is the best way to deal with financial problems. A skilled and trusted bankruptcy lawyer should be consulted.

WHAT CAN I DO IF I AM BEING HOUNDED BY A DEBT COLLECTOR?

If you fall behind in paying your creditors, or an error is made on your accounts, you may be contacted by a “debt collector.” The Fair Debt Collection Practices Act prohibits certain practices by debt collectors.

What to do: To stop a debt collector from calling you, write a letter to the collection agency telling them to stop. Once the agency receives your letter, it may not contact you again except to say there will be no further contact. Another exception is that the agency may notify you if the debt collector or the creditor intends to take some specific action.

If you believe a debt collector has violated the law by harassing you, you have the right to sue a collector in a state or federal court within one year from the date you believe the law was violated. The following practices are specifically prohibited.

Harassment, Oppression, or Abuse. For example, debt collectors may not:

False Statements. For example, debt collectors may not:

Unfair Practices. For example, collectors may not:

WHAT ARE MY RIGHTS AGAINST BANKS, CREDITORS AND DEBT COLLECTORS?

You have the following rights:

You may also take legal action against a creditor. If you decide to bring a lawsuit, here are the penalties a creditor must pay if you win: