Learning to manage money is a life skill everyone should possess, though it rarely gets taught in any formal educational setting. Money management skills are valuable to own at every stage in life, especially when trying to manage debt.

The more educated you can be about debt, creditors and the laws that protect you, the more likely you are to be treated fairly. This blog is going to discuss tactics collection agencies use and how you can fight back.  First, you need to understand who may be contacting you to collect on your debts – then we will go into how collection agencies may attempt to get your money.

If you are in debt and looking for a way to get out, consider ALL of your options. When all of your options are on the table, take time to think through the advantages and disadvantages of each and how they will affect your life in the long run. Sit down with a legal professional, too, to discuss your options and get advice and opinions about which is best for your specific situation. 

The effects of filing bankruptcy are felt almost instantly. The moment you decide to file bankruptcy you will likely feel some of the stress fade because you know the end of your financial nightmare is in sight. Once your petition is approved, you can begin the journey to debt freedom, feeling lighter and happier than you have felt in a long time. Put the nightmare behind you and begin living the life you have been dreaming of.

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Filing for bankruptcy seems like a big, scary decision, mainly due to its reputation and image painted by our media. High ranking officials and celebrities, such as George McGovern and Larry King, receive a lot of negative attention when they file bankruptcy. As of late our media is focused on Detroit, an entire city, going bankrupt. Unfortunately, the fact that individuals, businesses and even cities, are filing bankruptcy is the only part of the story that is “newsworthy,” and we don’t get to see their return to normalcy – to debt freedom. 

Becoming debt free can be done in 120 days or less if you file a Chapter 7 bankruptcy in Minnesota. To ensure the process is completed in three-four months, work with a bankruptcy attorney. A bankruptcy attorney will be your guide through the legal jargon, court meetings and mountains of paperwork, ensuring you complete all steps accurately and in a timely manner.

When filing for bankruptcy, having an attorney on your side can make all of the difference. Chances are you are already frustrated with your financial situation and stressed out because of all the problems that result from a lack of funds. Entering into a bankruptcy case without help will only multiply that frustration and stress, especially if you have no experience dealing with legal processes and language.

You cannot and should not borrow your way out of debt, especially if you are currently not able to manage your debt. Doing so will result in extended payment plans, and, in the end, you will be deeper in debt than when you started. This is precisely the foundation that debt consolidation programs are built on. By extending your debt timeline you will pay more money; that money then gets paid to the debt consolidation company you “hire” to help you manage your debt.

Chapter 13 bankruptcy, also called a “wage-earners” bankruptcy, is essentially a repayment plan based on what you can afford. It allows you to prioritize your debt and make payments based on your income. This plan is best for those who are experiencing a temporary setback and need some time and space to breathe, in order to get their financial situation under control.

Overview of Debt Management Programs

A debt management program enlists the help of a third party management company. You will work with a debt consolidation company or credit counseling agency to consolidate your unsecured debts into one monthly payment. Essentially you will make one monthly payment to your debt consolidation company or credit counseling agency. They will disperse payments to creditors on your behalf. You do not need a good credit score to qualify for a debt management program.

Overview of Debt Settlement Programs

The third blog in our debt consolidation solutions series focuses on debt settlement programs. It functions by halting all payments you are making to creditors and requires you to close your accounts. Instead, you will make monthly payments (usually lower than your current payments) to a trust account. When that account has built up enough to pay off your debt in full, the debt settlement program company will begin negotiations with your creditors. They will also attempt to negotiate a lower debt amount by offering to make a lump sum payment.

The second debt consolidation solution in our blog series is the Home Equity Loan. Here is a quick reminder of all the debt consolidation options we will cover, and in the order they will appear:

Debt consolidation can be a very confusing concept because financial terminology is complicated and contracts can be very convoluted. The term itself, debt consolidation, is confusing because it can be used to describe a group of debt solutions or as an individual option. For simplification purposes we are going to use the term ‘debt consolidation’ to describe the general concept of combining multiple unsecured debts into one.

Credit card debt is one of the most common reasons people seek debt help. It is easy to overspend when you aren’t paying cash and you aren’t held responsible for paying immediately. The interest built into this type of credit can add up quickly, especially if the balance isn’t paid in full or on time every month. And because accounts are being managed online it is much easier to overlook or disregard the added interest.

Credit card companies are in business to make money and we make it very easy for them to be profitable. Credit cards fulfill our need for instant gratification. It is very easy to spend money on a credit card because there is no physical exchange of cash and you are not expected to pay at the time of transaction. This process plays upon humans’ need for instant gratification.