Resolve Debt

In these tough economic times, Americans have become acutely aware of how vulnerable debt makes them.  The old Proverbs says that the borrower becomes the lender’s slave, and these days, that has a ring of truth, as many people deal with contemptuous calls from disdainful collections bullies and automated computer calls four and more times a day.  Is there any hope for the debt relief of America?

As of February 22, 2010, new laws restricting exploitive practices of credit card companies offer hope to consumers who are determined to get out of debt.  Credit card companies must now give 45 days notice before increasing your interest rate or other terms of your credit card, and those new terms only apply to new charges.  If you are at your limit and attempt to use your card, companies can not allow the charge to go through without your consent; if they do permit it, they cannot charge you over limit fees.  Payment times and dates have to be consistent and reasonable, and all of your payments have to be applied to the highest interest portion of your balance first.

These new rules governing credit card companies finally offer consumers like you a chance to get out of debt, but you still have to do your part:

•    Develop a budget.  There are thousands of books and websites describing how to write a budget.  Basically, you calculate how much money you bring in each month, and then allocate that money out to expenses, making sure to first cover the basics (food and housing) and setting aside a little for inevitable emergencies.  Planning a budget is easy.  Sticking to it is very difficult.  The rewards are worth it, but you will have to fully commit yourself to the process.

•    Contact your creditors.  Communication is the key, and is often the difference between recovering from a tough situation of making the devastating choice to file bankruptcy.  Talk to your creditors and explain your situation.  There may be options for deferred payments or lower interest.  Try to work out a manageable plan with your creditor.  Do not give your creditors your bank account information; a few unethical companies will take advantage.  An unexpected withdrawal could drain your checking account, costing you a fortune in fees.

•    Know your rights.  There are federal laws dictating when and how debt collectors may contact you.  You are obligated to pay for debts you incur.  You are not obligated to be bullied.

•    Be leery of “nonprofit” credit counseling companies.  There are legitimate organizations which will help you if you can’t get your finances in order on your own, but many credit counseling companies are scams, and they can do very little for you that you can’t do for yourself if you’re determined.  The Federal Trade Commission warns consumers to avoid credit counseling companies that promise that they can eliminate your debt or reduce it dramatically, charge monthly fees, require you to pay them directly, claim that your credit report won’t be negatively affected, or that you’re protected from legal action from your creditors.

In the past couple of years, there has been a lot of discussion in Washington and in the media about what the government can do about the debt relief of America.  After the bail-out and the stimulus packages, many people are asking – hoping – that help for their credit card debt is coming their way.   The reality is that even if you receive a government check in the mail to pay off your entire consumer debt, it would only be a temporary help.  The debt relief of America will only come through people like you who are willing to make permanent changes in your spending habits and money management practices.