How to manage your debt when it gets out of hand

The first thing I recommend is that you do NOT fall for the pitch of one of the many for-profit firms that say they do debt management, debt reduction or debt counseling.  They may imply — or even promise — that they can make significant reductions in your debt, or even eliminate it; but those promises are usually wildly exaggerated.  I have dealt with too many people who have signed up for these services and ended up with just as much debt as they went in with, and less money.

There is one organization that I do recommend.  It is the non-profit National Foundation for Credit Counseling (www.NFCC.org).  They do credit counseling, debt reduction, debt management, and even help with bankruptcy when that is appropriate.  Much of their service is free, and the rest has nominal charges.  I have sent people to them with excellent results.  For more information on how they work click to our feature article on Consumer Credit Counseling.

When you do a budget, you can see how much a month you can afford to allocate to your debts.  Then the credit counselor will determine if they can get your creditors to freeze late payments and maybe interest.  Once that is determined they can set up a debt management plan under which you pay them monthly and they distribute the money to your creditors.

If you’re ready to find a counselor at NFCC, just go to:  NFCC: Find a Counselor Now.

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