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Debt Management Tips

Tips to break a credit addiction and manage debt in a tougher financial environment.

By
Laura Adams, MBA
Episode #094

In today’s show I’ll share tips for managing debt in our current financial environment.

Dealing with Tight Credit

Everyone’s on the edge of their seats about the current credit crisis and the volatile financial markets. As the economy has declined, many consumers have been relying on credit sources such as credit cards and home equity loans for everyday spending.

But we’ve come to realize that the days of free-flowing credit are over. Banks and lenders are lowering credit limits on credit cards and scrutinizing new borrowers under their dusty microscopes. For many, this tight credit market will be the catalyst to address financial problems sooner rather than later. If you’ve been living above your means, addicted to credit of any kind, consider this podcast your personal financial intervention!

Face the Debt Music

Debt management is not a one-size-fits-all topic, because every debt-holder is unique. Your debt could be the result of many different circumstances such as overspending, job loss, or medical bills. You have to gauge your own situation and face up to your ability or inability to help yourself.

Bankruptcy

If you’re seriously drowning in debt, the worst case scenario is to declare bankruptcy. This is the debt management option of last resort. Because a bankruptcy can stay on your credit report for up to ten years it will affect many aspects of your life for a long time. If you’re considering this option, you’ll need to consult a bankruptcy attorney for help with some tough decisions.  Next week, I'll explore bankruptcy and foreclosures more thoroughly.

Credit Counselors

Anyone who intends to declare bankruptcy must get pre-filing credit counseling from an approved agency within six months before the filing. The agency must be approved by the U.S. Department of Justice in the judicial district where you plan to file bankruptcy. You must also complete a pre-discharge education course in order for debts to be officially satisfied.

If you have a debt problem that’s gotten out of control, you should also contact a credit counselor. You’ll want to seek out a nonprofit credit counseling agency that gets most of their funding from your creditors, not from you. They may require nominal fees, but won’t try to sell you anything. Make sure to choose a company that’s accredited with an industry agency such as the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA)

A good credit counseling agency should be open-minded to every option you have to improve your financial situation. They should help you create a budget and offer free educational resources. Try to meet with them in person if possible.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

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