Ask Jack About Debt

Multiple Debts

Do you have several debts piled up to unmanageable proportions?

This situation can happen before you know it, and you turn around and feel like you are under a mountain of debt. This often happens with unexpected medical bills.

If this is your situation, you really have only two choices. Read both of these option below.

Two ways to get debt relief

First, I urge you NOT to ignore the situation. You will still end up choosing one of the below courses of action in the end, but it will be under panic conditions. Your house may be in foreclosure proceedings. Your car may have been repossessed. Collection agencies will be driving you crazy.

Option 1: Consumer Credit Counseling

These are member agencies of the National Foundation for Credit Counseling (NFCC), founded in 1951 to provide services to consumers throughout the United States. They claim to "set the national standard for quality credit counseling, debt reduction services and education for financial wellness." In my experience they are effective, efficient and honest. It is the only debt management organization I am willing to recommend. Find out how to contact Consumer Credit Counseling Services.


Option 2: Bankruptcy

Bankruptcy. When your debts are beyond your ability to repay, and you have no hope of getting enough funds to pay them in the future, Federal law allows you to relieve some or all of the burden with bankruptcy.


There are two types of bankruptcy. One is available to everyone, while the other is reserved for those with incomes below an amount, which varies from area to area.

Chapter Thirteen bankruptcy requires that you pay back at least some of your debt. How much depends on the court. You must receive counseling and create a reasonable payment plan. This is similar to a "debt management plan," except it is the court, not your creditors, which decides how much you have to pay.


Chapter Seven bankruptcy allows you to eliminate all or most of your debt (some categories, like unpaid taxes are excluded). It is not available to people who earn more than a certain amount, which differs from area to area. You can protect your interest in your house up to certain amount. But you will still owe whatever mortgages you have outstanding on your house.


The primary drawback of bankruptcy (beyond its difficulty) is that it ruins your credit for a period of years. It will be hard (if not impossible) to get a home mortgage or a line of credit on a credit card. You should not choose this course lightly.


A lawyer is required for bankruptcy. Usually they will give you a free consultation. A partial list of lawyers who specialized in bankruptcy in your area can be found by going to several sites, some of which are sponsors of Ask Jack ABout Debt.

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