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What If I Can’t Pay My Debt

How To Deal With Debt Collectors

What happens if I can’t pay my credit card debt? | HMA

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In a Nutshell

If youâre receiving calls from debt collectors about unpaid debt, thereâs an obvious way to make it go away: Pay off the debt in question. But what if youâre at a point where itâs impossible for you to pay? It might seem like youâre out of options, but donât despair â thereâs a way out of this.

Written bythe Upsolve Team. Legally reviewed byAttorney Andrea Wimmer

  • Let’s Summarize…
  • If youâre receiving calls from debt collectors about unpaid debt, thereâs an obvious way to make it go away: Pay off the debt in question. But what if youâre at a point where itâs impossible for you to pay? It might seem like youâre out of options, but donât despair – thereâs a way out of this.

    Whats A Debt Management Plan

    A good credit counselor will spend time reviewing your specific financial situation and then offer customized advice to help you manage your money. After that review, a counselor might recommend that you enroll in a debt management plan to help repay your unsecured debts like credit card, student loan, or medical debts.

    But if a credit counselor says a debt management plan is your only option, and says that without a detailed review of your finances, find a different counselor.

    If you and your counselor decide a debt management plan is best for your situation, its a good idea to check with all of your creditors. You want to be sure they offer the types of modifications and options the credit counselor describes to you.

    Heres how a debt management plan generally works:

    • The counselor develops a payment schedule with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees.
    • You deposit money each month with the credit counseling organization.
    • The counselor uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to the payment plan.

    Buy A Quality Used Car Rather Than A New One

    Dave Ramsey, a popular personal finance radio host, once said that, A new $28,000 car will lose about $17,000 of value in the first four years you own it. To get the same result, you could toss a $100 bill out the car window once a week.

    The lesson here is that you can save yourself thousands of dollars if you buy a quality used car rather than a new one. The money you save can help you get out of debt much faster. Go to your local library and look in the Consumer Reports or Phil Edmonstons Lemon-Aid books to find a quality used vehicle.

    If you do choose to buy a new car, Consumer Reports has always recommended choosing a reliable car with good fuel economy, and then they suggest you keep it for 15 years. This will stretch your dollars the furthest and keep you out of debt as you will have plenty of time to save up for another new car.

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    File For Chapter 7 Bankruptcy

    Depending on the type of debt youâre getting calls about, there is one way to make it all go away: File for Chapter 7 bankruptcy and discharge the debt. It might seem like a nuclear option, but bankruptcy isnât necessarily the end â itâs a fresh start.

    Bankruptcy can give you a fresh start by clearing your unsecured debt with a bankruptcy discharge. A discharge can cover credit card debt, past-due medical bills, old cell phone bills, back utility bills, old debts from store cards, and certain personal loans. The U.S. Bankruptcy Courts reports close to $50 billion worth of nonpriority unsecured debt was scheduled in bankruptcy cases in 2018 alone.

    Not all unsecured debt can be discharged through a Chapter 7 bankruptcy. If you have child support, alimony, taxes, or a government student loan, the debt wonât be discharged through a Chapter 7 bankruptcy. Those debts are considered non-dischargeableâdebt that doesnât go away in bankruptcy. When you file bankruptcy, your unsecured debts are discharged, meaning they go away forever.

    You have a few options with secured debt during a Chapter 7 bankruptcy. You can pay remaining loan installments to keep the property, let the creditor take the property, sign a reaffirmation agreement, or file a Chapter 13 bankruptcy and enter into a repayment plan. If you arenât low-income, the court may tell you that you need to file a Chapter 13 bankruptcy.

    You Are Protected From Harassment By Law

    Paying Your Bills When You Can

    All debt collectors, including private individuals and debt collection agencies, must stick to the law detailed in sections 10 and 11 of the non fatal offences against the person act 1997. It makes it an offence to harass anyone in any way including by phone.

    It also says that unless they have a reasonable excuse, no one may harass you by persistently following, pestering or making contact with you.

    It is against the law for the creditor to make demands so often they aim to cause you or a member of your family alarm, distress or humiliation.

    Seek legal advice or report the matter to the Gardaí if the creditor falsely claims:

    • To be able to officially enforce payment
    • A document is official
    • They have started criminal proceedings for non-payment of the debt

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    Debt Settlement Vs Credit Counseling

    Credit counseling is a free or inexpensive service provided by nonprofits and government agencies. Interestingly, these services are often partly funded by credit card companies. By enrolling in a debt management plan with a , you may receive an interest rate reduction on your balances and a waiver of penalty fees.

    Those concessions may or may not be sufficient to help you pay down your debt considerably faster, and you may or may not be able to afford the new required monthly payments. In addition, you may not qualify for an interest rate reduction, even if you have a significant financial hardship.

    However, because you wont have to default on your debt, your credit score may suffer less. Also, credit counseling may offer additional financial assistance that can help you avoid similar problems in the future, such as budget development and financial counseling, and referrals to low-cost services and assistance programs to help you reduce your expenses.

    So how do you know which to choose if you dont want to pursue bankruptcy? Credit counseling is usually better to pursue before considering contracting a debt settlement company. Credit counselors can help you determine the best course of action which may include debt settlement, but in a way that benefits you and not necessarily a debt settlement company that is interested more in you as a client than your credit health.

    Options To Get Back On Track

    Being in debt can be stressful. But it’s more stressful to have a lender or debt collector chase you for overdue debt.

    If you struggle to repay, it’s best to act as soon as possible, whether you owe money to a finance company, bank, a friend or family member, or to a government agency.

    Find out what you can do to make repaying more manageable. Many lenders prefer to change your repayments, rather than risk missed payments.

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    What Is A Debt Management Plan

    A debt management plan is a formal agreement between you and your creditors to pay back your debt over a fixed period of time.

    This can be helpful if you are struggling to make monthly payments.

    When you sign up for a debt management plan, you will make one monthly payment to the debt management company.

    They will then distribute the money efficiently to your creditors.

    This can help you get debt under control and can help you pay it off quicker.

    Make sure you research all debt management companies before choosing one.

    Often creditors will be understanding and willing to work with you to come up with a payment plan that suits both of your needs.

    You should also create a budget to help keep track of how much money you are making and how much money you are spending.

    Stick to the budget once it is created in order to get debt under control.

    If you find yourself struggling, consider seeking professional help from a debt management company.

    There are many companies who offer debt management services such as Consumer Debt Help

    So be sure to do your research before choosing one.

    Debt consolidation may be an option for those struggling with multiple debts.

    What Happens If I Miss My Council Tax Due Date

    What if I can’t pay my credit card?

    Firstly you will be served a 7-day reminder notice and at the end of this time, if you still havent paid, you will be paying the entire years council tax. There are a maximum of 2 such reminders in a year .

    If you fail to pay the entire years tax the council can ask the magistrate for a liability order. You can go to court and explain the reasons for your non-payment, if they are acceptable.

    If this is not the case and the reasons you give to the council for missing the payment are not accepted the council can apply to take money from your Universal Credit, Income Support, Pension Credit, Jobseekers Allowance, and Employment and Support Allowance.

    Beyond this, the Council can send bailiffs to seize your property if there is no other way to recover your council tax through legal proceedings.

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    Stick To Your Debt Solution

    Stick to your new debt solution by making payments of the correct amount and on time. Debt Management Plans are not legally binding, which means defaulting on payments may mean the creditor pulls out of the agreement and decides to take legal action instead.

    And formal solutions like an IVA are legally binding, which could make the situation a lot worse of you miss payments, and could even lead to bankruptcy.

    Cover Your Four Walls

    When creditors are calling , its easy to get bulliedwhich hits even harder when you already feel like youre drowning in debt. Most of the time, theyll try to convince you that paying them is more important than keeping the lights on.

    Listen closely: The most important thing you can do is take care of your Four Walls firstand in this order:

    Before you spend even one more dime toward debt, make sure to take care of you and your family. We knowthat sounds backward when you cant pay your bills. But your family comes first! That means you need food in the fridge, lights and running water, a roof over your head, and a way to get to and from work every day.

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    Get A Second Job And Pay Down Your Debt Aggressively

    Getting a second job, or consistently picking up an extra shift or two, is a common way for many people to pay down their debt. This strategy for becoming debt free doesnt work for everyone, but if you can make it work, you could be debt free within a short number of years. For this to work, you must apply all of your extra income to debt repayment. Working the extra shifts or hours also doesnt need to be permanent. Once your debts are paid off, you can look at scaling back again.

    You could also consider generating some extra income to pay down your debt by capitalizing on a hobby you enjoy, or a skill set you might have. For example, if you happen to be a good writer, consider freelancing articles for blogs, newspapers, media outlets, or on a freelance website. If youre crafty, consider selling your creations on Etsy. If youre a handyman, see if you can pick up some extra jobs .

    Some people also use their home to generate some extra cash. Is it possible for you to rent out your basement, rent out the storage space in your garage, rent a room in your house , or can you take in a student for some extra income?

    What Can I Do If I Can’t Pay My Student Loan

    OMG, I Can

    If you have federal loans , the Department of Education has different programs that could help. Applying for these programs is free. Find out more about your options at the U.S. Department of Educations StudentAid.gov or by contacting your federal student loan servicer. Youll also find more about how to get out of default.

    With private student loans, you typically have fewer options, especially when it comes to loan forgiveness or cancellation. To explore your options, contact your loan servicer directly. If you dont know who your private student loan servicer is, look at a recent billing statement.

    You dont have to pay for help with your student loans. A company cant do anything you cant do for yourself. Student loan debt relief companies might say they will lower your monthly payment or get your loans forgiven, but they can leave you worse off.

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    Prioritize The Bills You Need To Pay

    When paying all your creditors is impossible, determine which debts you’re going to make sure you pay on time so you can put your money towards these bills first.

    For most people, it makes sense to pay back secured debt before unsecured debt. This means that your first available cash should go to covering your mortgage and car loans. If you don’t pay these bills, you put yourself at risk of losing your house to foreclosure or your car to repossession. Either foreclosure or repossession will do serious long-term damage to every aspect of your life — and both should be avoided at all costs.

    After secured debts have been paid, look at the fees and penalties you could be charged by the rest of your creditors. The goal is to make the consequences of a late or missed payment as painless as possible, so prioritize paying accounts that will charge the highest late fee or that will impose a penalty APR.

    You should also check out the grace periods each creditor provides. If one creditor offers a longer grace period than others, this could provide the time you need to get more money together.

    Get On A Plan To Get Out Of Debt

    Debt is a thief. Not only does it steal from your future, but it also steals from your peace in the present. When youre having a hard time making ends meet month after month, it wears on you. But listen: It doesnt always have to be this way! You dont always have to be in debt. You dont always have to scrimp and sacrifice and eat nothing but beans and rice.

    You can change your life! You get to be the hero of your own story . . . starting with learning how to get out of debt. And if you want to hear how someone else went from rock bottom to changing the trajectory of their future, watch Lesson 1 of Financial Peace University.

    So, get your footing back, get your bills up to date, and then give debt the kick in the pants it needs to get outand stay outof your life. How? By changing your behavior. Were guessing by now youre sick and tired of living paycheck to paycheck.

    Thats where the debt snowball comes in handy:

    Step 1: List your debts from smallest to largest, regardless of interest rate. Pay minimum payments on everything but the little one.

    Step 2: Attack the smallest debt with a vengeance. Once that debt is gone, take that payment and apply it to the second-smallest debt while continuing to make minimum payments on the rest.

    Step 3: Once that debt is gone, take its payment, and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown onto the next debtlike a snowball rolling downhill.

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    What Are Debt Collectors Allowed To Do

    The first and most important thing to know is that you have federally guaranteed rights and many states have similar rights. Here is what a debt collector cannot do under the Fair Debt Collection Practices Act :

    • Contact you between 9 p.m. and 8 a.m. without your permission
    • Threaten violence or using profanities when speaking to you
    • Contact third parties about your debt or otherwise embarrass you
    • Speak to your employer except under limited conditions
    • Pretend to be a government official or an attorney
    • Send letters that look like attorney or governmental letters but that are not
    • Send derogatory messages about you to a credit reporting agency
    • Send information on a postcard or via social media
    • Attempt to collect an expired debt
    • Hire an unlicensed credit collection agency
    • Communicate with you if you are represented by an attorney

    Why Ivas & Debt Management Plans Are Popular

    I Can’t Pay My Credit Card Bills

    IVAs and Debt Management Plans have become increasingly popular in recent years as people struggle to keep up with their debt.

    Both of these options offer individuals the chance to get debt under control and eventually pay it off.

    They are also helpful in that they stop the individual from accruing any more interest on their debt.

    Allowing them to make one, much more manageable, monthly payment.

    Be sure to do your research before choosing an IVA or Debt Management Plan to be sure you are getting the best deal possible.

    There are many debt relief options available to those who find themselves behind with their debt.

    Be sure to explore all of your options before making a decision.

    Some helpful debt relief options include:

    • Debt Management Plan
    • Debt Consolidation

    Each of these options has their own set of pros and cons, so be sure to weigh them all before making a decision.

    If you are still unsure what to do, consider seeking professional help from a debt management company.

    There are many companies who will help you best decide what is the best option for your current situation. Consumer Debt Help.

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