By knowing the answers to a couple of basic questions about your debt, you will be better equipped to handle the financial difficulties you may be facing.

Who is involved in my Debt Situation?

• Debtor - Any person currently using credit cards, holding a personal loan, paying on a home mortgage, or borrowing money from another party with an arrangement to repay credit or loans over a period of time, usually with interest.
  
• Creditor - Any bank, mortgage lender, credit company, retailer or other business extending credit or issuing loans to consumers.
• Debt Collector - Any person who regularly collects debts owed to others, including attorneys who collect debts on a regular basis.
  
• Third-party Financial Assistance - Credit Counseling, Credit Repair, Debt Consolidation, or other Agencies offering financial assistance to consumers. Some agencies are for-profit, while others are not-for-profit, often funded by communities, governments, or even creditors.

What are the Two Types of Debt?

• Secured Debts - secured debts are typically tied to an asset, like a car for a car loan, or a house for a mortgage. If payments are missed, the lender can repossess the asset. Secured debts are usually not included in credit counseling and debt managment plans.
• Unsecured Debts - unsecured debts are not tied to any asset. Examples of unsecured debts include credit card debt, medical bills, signature loans, and debts for other types of service.

What are my Debt Options and Resources?

If you are facing financial difficulty, there are a number of options and resources available to you. These options can range from simple solutions, like budgeting, to the last resort option of bankruptcy. Based on your level of debt, your level of discipline, and your prospects for the future, you'll have to determine which is the best option for you.

• Self-Help - Self-help may be your best option when dealing with debt and credit problems. Develop a budget to help realistically assess your income and expenses, and to help curb excessive spending. Your public library has information about budgeting and money management techniques. Low cost financial counseling services are also available in most communities. You may be able to contact your creditors directly to negotiate modified payment plans. If your credit history is less-than-perfect, time and responsible money management are your best resources. Be sure to contest any incorrect or out-dated information which may be negatively affecting your credit.
  
• Credit Counseling - If you're unable to resolve debt problems on your own, consider contacting a credit counseling service; they can help eliminate much of the stress of dealing with financial problems on your own. These services will help you establish a debt repayment plan and may help you reduce repayments with creditors. Some credit counseling services charge little or nothing for managing the plan, while others may charge a monthly fee.
  
• Debt Consolidation - You may be able to lower your cost of credit by consolidating your debt through a second mortgage or home equity line of credit. These loans may add up cost-wise, but may alternatively provide certain tax advantages not available with other kinds of credit. This option requires careful consideration, however, as these loans may require your home as collateral.
  
• Credit Repair Services - Credit Repair companies offer help in cleaning up your credit report. For a fee, they can help you dispute incorrect or inaccurate information in your credit history which may be damaging your credit rating. Be aware, however, that no one can legally remove accurate and timely negative information from your credit report. Also, keep in mind that everything a credit repair clinic can do for you legally, you can also do for yourself at little or no cost. Ultimately only time and a conscientious effort to repay your debts will improve your credit report.
  
• Bankruptcy - Personal bankruptcy is usually considered the last resort of debt management because results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, which makes it difficult to acquire credit, buy a home, get life insurance, or sometimes get a job. However, it is a legal procedure that offers a fresh start for people who can't satisfy their debts. You'll probably need to seek financial and/or legal counsel before deciding whether this option is appropriate for your situation.

Turning to a third-party or business that offers help in solving debt problems may seem like a perfect solution when your bills or credit become unmanageable, but you need to be cautious. Before you commit to anything, be sure to:
        - find out exactly what services the business provides and what it will cost
        - get everything in writing; never rely on oral promises alone
        - check out any company with your local consumer protection office and the Better           Business Bureau in the company's location. They may be able to tell you whether           other consumers have registered complaints about the business.

What are my Consumer Rights?

Federal laws, such as the Fair Debt Collections Practices Act are in place to protect your rights as a consumer. Educate yourself about your rights before submitting to the demands of a creditor or debt collector, or before making any major financial decisions.

• Fair Debt Collection Practices Act (FDCPA) - Prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting debts.
• Fair Credit Billing Act (FCBA); Electronic Fund Transfer Act (EFTA) - establishes guidelines for resolving mistakes on credit billing and electronic fund transfer account statements.
• Equal Credit Opportunity Act (ECOA) - prohibits creditors from discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance when deciding whether or not to grant credit.
• Fair Credit Reporting Act (FCRA) - Ensures that consumer reporting agencies furnish correct and complete information to businesses. Designed to promote accuracy and ensure the privacy of information used in consumer reports.

For more information regarding debt and credit related laws, read our tutorial Your Consumer Rights - Know Them.

For more information regarding these, and many other credit, debt, and consumer-related issues, visit the Federal Trade Commission's website at www.ftc.gov.