When debt gets out of hand.
Personal debt can easily become unmanageable, especially if there has been a change in employment status, divorce, illness, death or other crisis. When you realize you are unable to make your payments, the first thing you should do is contact your creditors to inform them of your situation and see if you can set up a new payment plan, possibly with reduced payments.
If you are a home owner, contact your mortgage company and explain your situation to them. You may be able to modify the terms of your loan, get a forbearance (a temporary reduction or suspension of your mortgage payments), or set up a repayment plan.
Contacting your lender, and doing so early on, is the single most important thing you can do to avoid foreclosure. For assistance and information on avoiding foreclosure, call 888-995-HOPE or go to www.995hope.org.
Make a budget to accurately assess your situation and to help you live within your means.
Consider getting a second job and using that supplemental income to pay off debt.
Contact a credit counseling service or debt management company. They can provide practical and legal financial advice regarding the use of credit. They can also renegotiate the terms of your credit agreements and arrange to pay off your debts. But take care when choosing a debt management company, as not all of them are legitimate. Some may charge excessive fees, misrepresent what they will be able to accomplish, or not pay your creditors in a timely manner, thus actually worsening your debt problems and your credit score. The National Foundation for Credit Counseling can help you locate a reputable credit counseling service in your area. You can contact them at 800-388-2227 or www.nfcc.org.
Make sure you know your legal rights concerning debt management companies. Under Georgia's Debt Adjustment Act (O.C.G.A. Section 18-5-1 et seq.):
- A debt adjuster may not charge you a fee of more than 7.5% of the amount you pay monthly for distribution to your creditors.
- All funds received from a debtor, minus authorized fees, must be disbursed to creditors within 30 days.
- A separate trust account must be maintained for your funds, along with certain insurance coverage, and audited annually.
- Copies of these audits and insurance policies must be filed annually with the Georgia Department of Law’s Consumer Protection Unit.
Please report any violations to the Georgia Department of Law’s Consumer Protection Unit.
As a consumer you also have the right to file a private legal action against a debt adjustment company that has overcharged you or mishandled your account in violation of the above provisions [O.C.G.A. Sections 18-5-2 and 18-5-3.2(a)]. Not only is the company obligated to refund all fees, charges or contributions you have paid, but through this action you may seek an additional restitution of $5,000 (O.C.G.A. Section 18-5-4). A private attorney can assist in filing the action on your behalf.
If you are considerably late paying your accounts, your creditors may forward the debt to a collection agency or debt collector to try to collect the money from you.
Rebuilding Your Credit