Do it yourself. If
it is at all possible, begin to manage your debts yourself. Contact your
creditors and work out payment plans with them; they would rather know that you
are planning to pay them regularly than to get nothing at all. Also be sure to
think about how you are going to plan your budget in the future so that you
avoid future debt. A reasonable budget may look something like this:
- Housing (mortgage or rent) 25%-30%
- Food (groceries, household items, meals out) 15%-20%
- Transportation (car maintenance and insurance, public
- Household (utilities, fuel oil, minor repairs) 10%
- Clothing 5%
- Health (costs not covered by insurance) 5%
- Personal (personal care, recreation) 5%
- Insurance (personal property, life health) 5%
- Debt (credit cards, car and personal loans, etc.)
- Savings 5-10%
(Based on a monthly budget consisting of after-tax
income for a family of four. Every family's needs are different; you may have
expenses that are different or exceed the ones listed above. But, if one of your
monthly expenses dramatically exceeds the percentage suggested, most experts
suggest that you reevaluate your budget.)
expenses is essential to any budget plan. You should also look for
sources of financial assistance from private or governmental agencies. If you
have any savings, it is advisable to use as much as possible to pay off your
debts; it is usually a good policy to reduce high-interest loans and credit
accounts quickly. And above all, avoid incurring new debt.
Make sure the debt
consolidation organization you use has non-profit status. Remember that
in New York State, budget planners need to have non-profit status and be
licensed by the Department of Banking unless they are attorneys.
Budget planning involves long-term as well as short term
advice. Your debt consolidator should advise you on how to stay out of debt, not
only how to get out of it.
Bankruptcy is not the only
option. Declaring personal bankruptcy should be your last resort.
Consider what the consequences are of filing for bankruptcy.
Beware of firms that make
vague claims about their services. A firm that claims to be able to
help you with debt or credit problems may be just offering services such as
secured credit cards or credit repair. While these services may be part of a
long-term budget plan, there is no such thing as a "quick fix" to a serious
Beware of large advance
fees. No reputable non-profit debt consolidator will ask for more than
a small fee in advance. Again, any advance fee for credit repair is illegal in
New York State.
For more information:
National Foundation for
Avenue, Suite 507
Call or send a self-addressed stamped envelope for the
nearest member non-profit consumer credit counseling service (CCCS). These over
1,100 local CCCS offices will provide debt consolidation services for a nominal
The New York State
Department of Banking
New York, New York 10006
find out whether a debt consolidator is licensed.