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Repaying debts outside of bankruptcy

First things first

In making a plan to get control of your financial situation, make sure that you pay the bills that are the most important, not necessarily the ones who call and threaten you the most.

For most families, housing and transportation are the most important expenses they have:  

  get evicted or foreclosed, and you are homeless;  

  have your car repossessed and you can't get to work 

Pay these expenses first.

Deal with debt collectors

Don't be intimidated into paying unsecured credit card debt before housing, transportation and taxes.  When all is said and done, credit card collectors don't have easily available ways to MAKE you pay;  they rely on irritation or fear to GET you to pay voluntarily. Don't be swayed from your plan to put first things first.

Collectors rely on your ignorance about collection proceedings to create fear, shame, and insecurity. Unsecured creditors can't take money from your account or seize your assets without suing you first and getting a judgment. You have to get notice of such a suit and an opportunity to contest the charge.

Creditors sometimes threaten to "send you to collections" as though it was a real place, full of horrors. It just means they are handing the problem off to someone else, who has no more real power to take your assets than the speaker does. Don't be stampeded.

The Fair Debt Collection Practices Act gives you a right to tell collectors not to contact you. Some states have similar laws. The California statute applies to the creditor itself as well as any third party collector.

Know your rights about debt collection. There are some real bad actors out there.

Be cautious about debt consolidation loans or services

Whole industries have sprung up to "help" the financially stressed recover.  Some of their "help" you are better off without.  See our discussion of the dangers of some debt counseling.

Avoid credit repair scams

Another group of scammers prey on the fixation of consumers with their credit reports and want you to pay them to "fix" your credit report.  The things that can be done legally to correct credit reports, you can do yourself;  what they propose to do may well be illegal or ineffective.  

Read the FTC's tips on credit repair

Read Elizabeth Warren's book All Your Worth.

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