When making a plan to get out of credit card debt, the first thing you want to do is have an accurate accounting of the amount you owe on each credit card. Then, sit down as a family and talk about some ways that you can deal with this debt. Is there any thing anyone can do to cut out some regular an ongoing expense that could then be used to apply to that credit card debt? For example, if you stop and buy coffee on your way to work each day, you could carry your own coffee and put aside that coffee money for paying for that debt? That extra $5.00 to $15.00 dollars a week may not seem like much, but applied to one of those credit card bills consistently can make a big difference.

You can also call each of the credit card companies you owe money too and ask to talk to a representative. Explain your financial situation, tell them that you really want to take care of the debt and try and make some deal with them. Some people have actually been able to persuade one or two card companies to forgo interest charges as long they paid $10.00 dollars or so over the minimum payment and didn’t put any additional charges on their credit cards. While this isn’t a likely occurrence it can happen especially if the credit card company sees a chance to at least recoup some of their losses.

For smaller credit card debts try and put money aside and then negotiate with the card company to make a reduced lump payment to pay off that one debt. Many card companies will cut the debt owed to half or almost half if you can pay off the debt in one lump some payment. Keep track of your debts as seeing that some go down and down helps you stay focused and positive.

Another option is to roll all of the credit card balances that you have onto one credit card in order to just pay one bill each month and put the bulk majority of their money towards this. For many this is the way that they do end up getting out of debt. However, for some other people this just puts them more in debt since they are going to find that they now have credit cards with a zero balance and they are those that they can use when they are out.

Another option, and for those that are serious about getting out of debt, this may be the best option, they should consider debt management plans. With these companies the person will find that they can get all of their credit card accounts onto one bill that they pay each month, and avoiding the interest fees that are tacked on each month. For many people this can save them hundreds of dollars in the long run and they can actually pay off their debt faster. The downfall is that this does affect your credit rating and the person will find it almost impossible to be approved for new credit. But for many it is the last option that they have since they are going to find that they can pay the debt off and start over fresh later.

Think of it this way. Credit card companies make their money off the interest they get when you carry a balance on your credit card. This means when you pay off that credit card each and every month the credit card company makes little if any profit. The only way they can make a profit from issuing that credit card is if the credit card holder cannot pay their monthly charges in full and has to carry a balance from month to month. When you carry a balance, the credit card charges interest on the amount of money you still owe. And that interest is figured into your next monthly payment. Your monthly payment amount is made low enough to just cover the interest you owe and a very minimal amount of the principal so that you will continue to owe for your charges.

When you use the credit card the next month and again leave a balance the credit card company then tacks on even more interest and on and on it goes. In the end if your balance is high enough you may spend months and even years making credit card payments and never seeing the balance decrease significantly. Which is exactly what the credit card company wants. After all, if you catch up and pay off that balance then the company can’t continue to collect interest and there goes their profit.

So before you charge that next item on your credit card stop and think about who is really going to benefit. The chances are it isn’t going to be you unless you can pay off those credit card charges in full at the end of the month. Don’t be fooled by those seemingly good deals that credit cards companies offer as any offer they make are designed for only one purpose and that is to increase their profits and to do that they need to keep you in as much credit card debt for as long as they possibly can.

It’s no substitute for a regular, dependable income, but having some savings in the bank can make all the difference if you do end up losing your job. At the same time, carrying debts can make a period of unemployment a lot harder than it might otherwise have been.

To illustrate the kind of issues you could face, let’s take a look at three different imaginary people in three very different situations…

Someone with savings

If someone with substantial savings loses their job, it’s worrying – but it could be worse. With money in the bank, they’ll know they can afford their rent/mortgage and other essential expenses for the foreseeable future. Depending on how much they have saved, and on how quickly they’re able to find a new job, those savings might be enough to tide them over until they can secure a new steady source of income.

It may even mean they can afford to maintain their standard of living in the meantime, although it makes sense to cut back on spending anyway, just in case finding that new job proves more difficult than they thought it would.

To name just one more benefit (and there are many), someone in this situation will be more able to wait for ‘the right job’, rather than feeling they have to take the first opportunity that comes along, even if it’s not what they’re looking for or if it’s poorly paid.

Someone with neither debts nor savings

If someone ends up unemployed and has neither debt nor savings, they won’t have the security of knowing they can afford their immediate needs – but they also won’t be worried about letters coming through the door from their creditors.

Even so, unless there’s something that lessens the financial impact (they can move back in with their parents, for example, or get a redundancy payment, or have valuable property they can sell), that lack of savings could make it a very uncomfortable period in their life.

The difficulties they would face will largely depend on what benefits they qualify for, how quickly they find a new job, whether or not a friend / family member can help them out, etc.

Someone with debts

Someone with substantial unsecured debts faces a real challenge if they’re made unemployed.

On top of all their ‘normal’ living expenses, they’ll have to make payments towards their unsecured debts as well – or contact their lenders and explain why they can’t. Their lenders may well agree to accept reduced payments (or even no payments at all) for a while, until they have a chance to get ‘back on their feet’, but failing to stick to their original repayment agreements can still impact on their credit rating and add to the overall cost of repaying their debts.

The Think Money website has some useful debt guides and information on debt solutions such as debt consolidation and debt management.

Preparing for the worst

If all goes well, it won’t be an issue anyway. Plenty of jobs were secure through the recession and will remain that way now.

Nonetheless, it’s best to ‘prepare for the worst’ even as we ‘hope for the best’. If you have savings, it never hurts to add to them. If you haven’t, remember that financial experts tend to recommend having at least three months’ worth of income put aside for a rainy day.

And if you’re carrying debts, now could be the ideal time to reduce them by as much as possible. To name just two factors (one good and one bad, for the sake of balance)…

The bad news is that the ongoing uncertainty in the country’s economy means many people’s jobs could be under threat even though the actual recession is over.

The good news is that many people are in a good position to work on reducing their debts. It may not help tenants or homeowners with fixed-rate mortgages, but millions of homeowners with variable-rate mortgages are paying far less per month than they ever thought they would, which means they could put more than they expected towards their savings accounts – and/or their unsecured debts – without actually paying more in total than they were back before the base rate dropped to 0.5%.

Useful resources:

• http://jobseekers.direct.gov.uk/
• http://www.direct.gov.uk/en/Employment/index.htm
• http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/index.htm
• http://www.thinkmoney.com/debt/
• http://www.walthamforest.gov.uk/index/out-of-recession/living-costs.htm

1. Check the status of the company with the BBB: Before handing over your distressed finances into the hands of a stranger company, check the status of that company with the Better Business Bureau. Building the trust of consumers is one of the most important factors that a debt management company should concentrate on. Only a reputed and trustworthy company will treat you as a consumer seeking help rather than a customer. If you check that the company is registered with the Better Business Bureau (BBB), you can stay sure that this is a trustworthy one.
2. Determine its non profit status: If the company that you are referring to, claims to be a non profit organization, make sure that you check whether or not it is truly non profit. There is a sudden increase in the number of scam companies who pose to have a non profit status, but are not. The non profit companies have a certificate awarded to them by the IRS. Ask for this certificate and if you see that the company representative hesitates to show you this certificate, consider giving a second thought about working with that company.
3. Check the fee structure of the company: If you come across a for profit debt management company that charges advance fees for their services, be sure that they are not trustworthy. Recently the FTC has cracked a new set of rules to restrain the unscrupulous practices of the debt relief companies. This step has been taken to safeguard the debtors from the grasp of the greedy companies. The FTC has banned the charging of advance fees until the companies reduce your debts. Therefore, do not plunge in reducing your debt burden by a company that charges upfront fees for providing you service.

Even though most Americans are struggling to pay off their multiple credit card bills through debt management companies, it seems that America is once again sliding back to its spendthrift ways. Try to avoid the lure of living beyond your means and stop incurring debt as much as possible to secure your financial life.

Payment protection insurance, commonly known as PPI, is a type of insurance which is sold alongside financial products such as loans and credit cards to cover repayments if the borrower or cardholder is somehow unable to service the payments due to unemployment or illness. PPI is, however, controversial because there are many reported cases of policies being mis-sold to customers who end up being unable to claim the benefits resulting in banks making insane profits from the premiums that were sometimes added to the loan amount, driving up the costs for customers.

Based on a report on the 11.08.2010 this year, banks may be forced to refund up to £3.2 billion worth of mis-sold ppi and it is no wonder why they have resorted to filing for a judicial review against the FSA’s order. On the consumer’s side, it would be of great interest especially those who are presently in some form of debt or another to review their ppi to see if they have been mis-sold or have paid in excess of what they actually need to. Companies are available to assist such customers to make ppi claims and in this economic climate, any recovery is very much welcomed indeed.

Debt Relief Orders are issued by the Official Receiver. The OR will write to your creditors informing them that they cannot take any action to recover money from you without leave from the court. They will also inform your creditors that you are not allowed to service your debts and that you will be discharged from your debts when the order ends which usually lasts for a year or so.

However, bear in mind that a DRO may be amended or even cancelled in the event your financial position improves. Do also note that if you are already a bankrupt or is currently under the IVA, you may not apply for a Debt Relief Order.

For starters, do not just move your debt around from one card to another. First off, this is not solving your debt problem at all, in fact it is just adding more to it. Many times people think that they are saving money by switching to a lower interest rated card, however, many times they are charged a fee for transferring balances that do not help even out the different between interest rates after all. Secondly, there is no need for you to take money out of your retirement plan to pay off these debts. For one this will affect the return that your retirement plan is getting off of the funds, and two, you can pay down the debt on your own.

The easiest way to pay off your credit card and end up saving you money in the long run is to pay it off in one lump sum. However, this is not always possible for a person, which is understandable. But this option has huge advantages. The best benefit of doing this is that when you pay off the credit card balance in one lump sum then you avoid the impending interest rates that will drive up the balance slowly.

If paying off your credit card in one lump sum is out of the question, then another option that you can do that will have you noticing results is to pay biweekly payments on your credit card. The payment amount can be the minimum amount or more if you can afford it. Making only the minimum payment, once a month, will make you start wondering if you are making a dent or not. But paying two payments a month is like paying off two years in one year which means that you will notice a huge difference and in no time have the entire credit card paid off.

If you are struggling with credit card debt then you realize how frustrating it can be knowing that you have no breathing room when it comes to your bills. Paying off the credit card is something that you should make a priority. Once you have completely paid it off, you will be surprised at just the breathing room that you will have once it is paid in full.

Only buying the things that they need to survive, with maybe a small amount of money for entertainment, will keep the wolves from the door. Credit cards are the biggest enemy that gets people into debt. Unfortunately, that is what the credit card companies are hoping for. It is the only way that they can stay in business. They would rather a person keep making payments than to pay them off completely. When people are spending money and making credit card payments they are happy. When people pay their debts off, they will begin to get new credit card offers in the mail, just asking for them to go back into debt.

In a perfect world, people would have enough money for anything they wanted, without going into debt, but this is not a perfect world. The key is to cut up all credit cards except for one. One credit card should only be used for emergencies. A person still needs to survive, and if their bills end up taking most of their paychecks, they need food to survive. Credit cards should never be used to pay rent or bills. Rent and bills are very large amounts, and this could end up backfiring on people when they find themselves in debt past their limits. Credit cards should only be for necessities, such as food, gas, and other odds and ends. Once the credit card bill comes in, the amount should be small enough that a person can pay the card completely off. Keeping the credit card bill payed off is the only way to keep out of debt, despite what the credit card companies want. Finding a spot in life where people feel comfortable with what they have in their lives will keep them from going into debt. Sometimes going into debt is a psychological matter that has more to do with the mind than actual needs. When a person has control over their lives, and their financial situations that is when they will feel comfortable with their lot in life.

A chapter thirteen bankruptcy is the only real aid in a situation where a person is about to lose their home. A debt consolidation or negotiation program cannot really help in these situations, so a chapter thirteen is the only real viable option that a person will have on their side. The late payments and fees will have to be paid up after the five year time period, or the foreclosure will go back into process. People will still need to make their regular house payments, but they will also need to settle a payment plan through the bankruptcy court with a reasonable payment to catch up on back payments and late fees. This is a great solution for people who do not want to lose their homes. A person can try to file a chapter seven bankruptcy, but if the chapter seven does not go through, they will automatically be put into a chapter thirteen program. Some people believe that they can catch up on their payments if they did not have to pay so many other bills, such as credit card bills, so they try to file a chapter seven bankruptcy to absolve themselves of those debts, but if they are denied a chapter seven, it will put them into a chapter thirteen.

The best thing for a person to do is automatically reach out for help the minute they start to go into default on their home loans. It is much better to file a chapter thirteen bankruptcy than it is to wait until the bank decides to foreclose on the home. A chapter thirteen can take some time to get together, so people need to leave themselves enough time to file.