Are you having trouble paying your bills? Worried about losing your home or your car? You’re not alone. Many people face a financial crisis at some point in their lives. Here’s what you need to know how to get out of debt.
How can I get out of debt?
Start by making a budget, a plan for how you’ll spend your money each month. It will help you see how you spend your money now and how you might spend money differently.
To make a budget:
- gather your bills (utilities, insurance, etc.) and pay stubs
- look at receipts to see what you typically spend on things like groceries, entertainment, transportation, clothing, and everyday expenses
- add up all of your paychecks and any other income, and subtract your expenses from that
When you’re done, look for things in your budget you can change so you have more money left over each month. Your goal is to stop adding to your debt, and also to pay down the debt you already have, if you can. You can find information about budgeting and money management techniques online, at your public library, and in bookstores.
What if I’m behind on my bills?
Don’t wait. Call your creditors, which are the companies you owe money to. Do it before a debt collector gets involved. Tell them what’s going on, and try to work out a new payment plan with lower payments you can manage.
What if my debt has already gone to a debt collector?
You might want to talk to the collector at least once, even if you don’t think you owe the debt or can’t repay it immediately. That way you can confirm whether it’s really your debt, and if it is, you can find out from the collector more information about it. In talking with a debt collector, be careful about sharing your personal or financial information, especially if you’re not already familiar with the collector.
Also know the rules a debt collector must follow. For example, a debt collector has to tell you: how much money you owe, whom you owe the money to, and what to do if you don’t think it’s your debt. And if you tell the collector in writing that you do not believe this is your debt, the collector has to send you verification of the debt, like a copy of a bill for the amount you owe, in the mail.
A debt collector also has rules on how it collects a debt.
For example, a collector can’t
- contact you before 8 a.m. or after 9 p.m., unless you agree to it
- contact you at work if the collector is told you’re not allowed to get calls there
- tell anyone else about your debt
- harass you or lie to you
If a debt is old, check your state law to find out if it is “time-barred.”
When a debt is time-barred, a collector can no longer sue you and win to collect it. Under the law of some states, if you make a payment or provide written acknowledgement of your debt, the clock may start ticking again, so it’s important to check before you pay anything. Learn more here about your rights and the rules collectors must follow.