Debt Management Guide
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5-step emergency plan for dealing with debt

The list could go on and on -- carpooling, coupons, cutting out dry cleaning.

"You've got to make the tough calls, even on the little things," Sweet says. "And people say, 'Oh those are just little things, I have big debts.' Well you've got to start somewhere, you have to cut out the big things but you have to cut out the little things -- they add up.

If you look at your monthly spending and just don't see anything that can be cut out, you may need to get professional help.

"Go to a reputable credit counseling service and get help with budgeting," Sweet recommends. "They'll do an evaluation to see if they can even help you. If you're so far gone that you don't even have enough income to start paying off your creditors, they'll tell you that you're beyond their help and may have to file for bankruptcy."

Besides decreasing spending, another option would be increasing your income. "Consider getting a second job," Sweet advises.

4. Pay your bills

So, your budget is whippet-lean, yet there's still not enough money to stretch across all your obligations? You do have options.

"If you're unable to pay small bills, it's a good idea to contact the business to see if you can work out an agreement," Davidson advises.

In the case of an extreme emergency, "If it's a utility bill, or something that doesn't report to the credit bureaus, it's sometimes OK to skip it -- if it's a one-time situation where you're in a financial crisis -- if you have to in order to pay bills that are reported to the credit bureaus -- you can avoid damage," she says.

After paying your rent or mortgage, the loan or credit card with the highest interest rate comes first, while paying the minimum on the rest of your debts.

"By far the most expensive kind of debt you can have is payday loan debt," Davidson says. "Consumers should really do anything they can to pay that off first."

Similarly, collection accounts should hold high priority. Unpaid collections are worse than paid collections. You can negotiate a payoff settlement that reduces your bill, and when you do, demand that all derogatory remarks be removed from your credit report or at least reported as paid in full. Be sure to get agreements in writing before sending off your payment.


Be proactive when you're struggling with payments. Call your creditors and negotiate to keep your accounts current and from being reported as delinquent or "bad debt." You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.

"Most lenders want to help you find a solution," says Davidson.

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