Photo (cc) by C.K.H.
Here’s an email I recently got from someone who has overcome a major problem, but is now dealing with the aftermath.
If you were to view my credit report, or score….you would probably find that I am at the lowest end of the totem poll. I had a gambling problem 4 years ago, since then have attended Gambler’s Anonymous and have been gamble free ever since. However, my debt that had accumulated is still trailing me. Several accounts have been sold and resold to collection agencies, so much so…I’ve lost track of where most of them are. Nothing has been paid in well over 3 years. I am not ignoring the fact that the debt is there…. just that I do not have the means to pay. I tried one of those debt reduction agencies, only to find out they are merely scams. I then decided bankruptcy is the way to go.
In all seriousness, I am in need of a car to get back and forth to work. With this debt turmoil I am in, what would you suggest is my best course of action? I really see no other way out other than bankruptcy. There is over $25,000 in debt. Thank you in advance for your help.
Since we haven’t talked about it in a while, let’s use M’s situation as a primer for what to do when faced with debt that’s threatening to destroy your peace of mind.
Step 1: Recognize that it’s not the end of the world
Whether it’s a gambling problem, a drug problem, an unemployment problem, or a spending problem, you’re not alone – not by a long shot. If there’s one thing that we all have in common, it’s that we have problems. When we’re in the throes of our problems, we feel bad about ourselves. And after we overcome them, we recognize that it’s not the number of times we fall down that matters, it’s the number of times we get back up.
It’s natural to feel shame around the debt that so often follows problems. But shame is counterproductive, so do your best to keep it at bay. Sure, you’ve made a mess. Who hasn’t? While you clean it up, try to focus on the victory –overcoming your gambling addiction – rather than the fallout from it.
Step 2: Get help
The way to clean up a debt problem is to get free help from an objective source. I wish I could say this is easy, but thanks to the vast number of slimy scumbags in the world, it isn’t.
M says, “I tried one of those debt reduction agencies, only to find out they are merely scams.”
That’s like me being sick and saying, “I tried one of those witch doctors, only to find out they are merely scams.” In other words, just because M found a sleazeball doesn’t mean everyone is. How do you find a good one? From Help With Debt: Credit Counseling:
In my experience, Consumer Credit Counseling Service is a good option. They’ve been around for nearly 60 years, have offices in nearly every city, offer independent accreditation and counselor certification, and provide an approach as close to holistic and objective as you can find. That’s not to say that there aren’t other good agencies, or that all CCCS offices are perfect. But if I’m going to make a blanket recommendation for a national organization, that’s the one.
Consumer Credit Counseling Service agencies, as well as some others, belong to an organization called NFCC, or the National Foundation of Credit Counselors. Another national organization that represents credit counseling agencies is called the Association of Independent Consumer Credit Counseling Agencies, or AICCCA. I personally know many members of AICCCA and in my experience, they’re also normally credible and well-intentioned. You can find NFCC members near you on their Find a Counselor Now page. You can find AICCCA members near you by using their state-by-state lists.
So I’d start by getting your bills together, then contacting one of these agencies, either by phone or in person. If the person you talk to sounds less than objective – in other words, more like a salesman than a counselor – try another one. There are plenty, and their advice is typically free.
Step 3: Don’t get pushed around
If you have accounts that are in collection, you’re no doubt being badgered by collection agencies. While it’s possible that they’re treating you with dignity and respect (see Step 1) it’s likely they’re not.
Read this story: Abused by a Debt Collector? Get a Free Lawyer. The title says is all: Debt collectors have to follow the rules. From that story…
The Fair Debt Collection Practices Act stipulates what third-party debt collectors can and can’t do when trying to collect. In 2009, the FTC received almost 120,000 complaints about third-party debt collectors: an increase of nearly 50% from 2008. The two most common complaints were phone harassment (34.7%) and obscene, profane or abusive language (13.5%), both violations of the law. And the FTC is taking violations seriously. For example, just yesterday they issued this press release about a million dollar fine levied against one national collection agency.
You don’t deserve to be treated like a doormat, nor should you tolerate it. And if your legal rights are being violated, you might qualify for free legal help to make it stop.
Step 4: Let time do its thing
M doesn’t provide enough information to know whether credit counseling will work for her, or whether bankruptcy is a better option. But whatever she ultimately does, odds are that she’s going to be dealing with a bad credit score for some time to come. But nothing lasts forever. Bad marks on your credit history fall off after seven years; a bankruptcy after 10. The older they get, however, the less they’ll matter, especially if she does what she can to start producing good credit as soon as possible.
I’ve known plenty of people – countless, actually – who started out with horrible credit and ended up smelling like a rose. So don’t let a bad credit score get you down. It’s going to improve, and faster than you think. Besides, what’s the downside? You can’t borrow money? Worse things can happen.
If you’d like to know more about repairing your credit history, check out 3 Steps to Improve Your Credit History.
Got more money questions? Browse lots more Ask Stacy answers here.