Managing Debt For Dummies E-Book

John Ventura

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch
• Veröffentlichungsjahr: 2011

Seitenzahl: 503

Beschreibung

If you're trying to kick the "Buy Now/Pay Later" habit and get your spiraling debt under control, you need Managing Debt For Dummies now! This practical, commonsense guide provides straightforward strategies for coping with every kind of secured and unsecured debt, including, personal loans, car loans, mortgages, home equity loans, lines of credit, credit cards, finance company loans, and student loans. You'll find out how easy it is to: * Distinguish between good and bad debt * Go on a "debt diet" to get back into financial shape * Start a filing system to track debt and protect life after debt * Adopt a smart spending regimen * Increase your income * Consolidate your debt * Decide which bills to pay when you can't pay them all * Use credit cards responsibly You can still live well while slashing spending on groceries, clothing, and entertainment. Find out how in Managing Debt for Dummies.

Leseprobe

Managing Debt For Dummies

by John Ventura

Managing Debt For Dummies®

Published byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.com

Copyright ” 2007 by Wiley Publishing, Inc., Indianapolis, Indiana

Published by Wiley Publishing, Inc., Indianapolis, Indiana

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax [phone]. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax [phone], or online at http:// www.wiley.com/go/permissions.

Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendor mentioned in this book.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional person should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Website is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Website may provide or recommendations it may make. Further, readers should be aware that Internet Websites listed in this work may have changed or disappeared between when this work was written and when it is read.

For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax [phone].

For technical support, please visit www.wiley.com/techsupport.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.

Library of Congress Control Number: 2006939511

ISBN: 978-0-470-08486-1

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

1B/RR/QR/QX/IN

About the Authors

John Ventura: John is a best-selling author and a nationally board-certified bankruptcy attorney. He is also an adjunct professor at the University of Houston Law School and the director of the Texas Consumer Complaint Center at the Law School.

As a young boy, John dreamed of becoming a Catholic priest so he could help everyday people, and he spent his high school years in a Catholic seminary. After graduating, however, John decided to achieve his dream by combining journalism with the law. Therefore, he earned an undergraduate degree in journalism and a law degree from the University of Houston Law School. Later, he and a partner established a law firm in Texas, building it into one of the most successful consumer bankruptcy firms in the state. He subsequently began a successful consumer law firm in South Texas.

Today, as Director of the Texas Consumer Complaint Center, he supervises law students as they help consumers with their legal problems. He is also a regular speaker at law conferences around the country and serves on the Bankruptcy Council for the Texas Bar Association.

John is the author of 13 books on consumer and small business legal matters, including Law For Dummies, 2nd edition; The Everyday Law Kit For Dummies;Divorce For Dummies, 2nd edition; and Good Advice for a Bad Economy (Berkeley Books). John has been interviewed about consumer money matters by numerous national media including CNN, NBC, NPR, Bloomberg Television & Radio, The Wall Street Journal, USA Today, Newsweek, Kiplinger’s Personal Finance, Money, Inc. Martha Stewart’s Living, Bottomline, Entrepreneur, Bankrate.com, CBSMarketWatch.com, and MSNMoney.com. In addition, his comments and advice have appeared in major newspapers around the country, and he has been a frequent guest on local radio programs.

Mary Reed: Mary Reed is a personal finance writer who has coauthored or ghostwritten numerous books on topics related to consumer money matters and legal rights. The books she has coauthored with John Ventura include The Everyday Law Kit for Dummies, Divorce For Dummies, and Good Advice for a Bad Economy (Berkeley Books). Mary has also written for the magazines Good Housekeeping, Home Office Computing, and Small Business Computing, and she has ghostwritten numerous articles that have appeared in national and local publications.

Mary is also the owner of Mary Reed Public Relations (MR•PR), an Austin, Texas-based firm that provides public relations services to a wide variety of clients, including authors, publishers, attorneys, financial planners, healthcare professionals, retailers, hotels, restaurants, and nonprofits.

Prior to starting her public relations business and writing career 20 years ago, she was vice president of marketing for a national market research firm, marketing director for a women’s healthcare organization, and public relations manager for Texas Monthly, a national award-winning magazine. She received her MBA from Boston University and her BA from Trinity University in Washington, DC.

In her free time, Mary serves on the board of a community development corporation in her neighborhood. She also enjoys long morning bike rides, road trips with her husband, gardening, working her way through the stack of books by her bed, taking care of her six cats, and spending time with her family and many friends.

Dedication

From John: To Mary Reed, my writing partner and friend.

From Mary: To my friend Ellen, who is always there for me. Your love and affection mean more than words can say.

Authors’ Acknowledgments

Thanks to Joan Friedman, the editor for this book. Despite relocating to Texas from Indiana with her family in the middle of this project and having to get her family settled before the start of school, Joan made the editing process a breeze and was a pleasure to work with. This book is a far better product because of her. A big thanks as well to Kathryn Perron, our technical reviewer, for her queries and comments.

Mary would also like to thank her husband, Rodney Root, for his constant support while she toiled away for endless hours this summer in front of her computer and for his willingness to do more than his share of the housework and errand-running so she could enjoy her down time.

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/.

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Project Editor: Joan Friedman

Acquisitions Editor: Tracy Boggier

Technical Editor: Kathryn Perron, Momentive Consumer Credit Counseling Service, Inc.

Editorial Manager: Michelle Hacker

Editorial Supervisor: Carmen Krikorian

Editorial Assistant: Erin Calligan, Joe Niesen, Leeann Harney

Cartoons: Rich Tennant (www.the5thwave.com)

Composition Services

Project Coordinator: Adrienne Martinez

Layout and Graphics: Stephanie D. Jumper, Barry Offringa, Laura Pence, Alicia B. South

Anniversary Logo Design: Richard Pacifico

Proofreaders: Aptara

Indexer: Aptara

Publishing and Editorial for Consumer Dummies

Diane Graves Steele, Vice President and Publisher, Consumer Dummies

Joyce Pepple, Acquisitions Director, Consumer Dummies

Kristin A. Cocks, Product Development Director, Consumer Dummies

Michael Spring, Vice President and Publisher, Travel

Kelly Regan, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher, Dummies Technology/General User

Composition Services

Gerry Fahey, Vice President of Production Services

Debbie Stailey, Director of Composition Services

Contents

Title

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Icons Used in the Book

Where to Go from Here

Part I : Getting a Grip on Your Finances

Chapter 1: The Basics of Managing Too Much Debt

Taking Stock of Your Finances

Using a Budget to Get Out of Debt

Taking the Right Steps When You Have Too Much Debt

Handling Debt Collectors

Paying Special Attention to High-Stake Debts

Getting a Financial Education

Chapter 2: Facing Financial Facts

Answering Some Questions

Evaluating Your Relationship with Money

Checking Out Your Credit Reports

Finding Out Your FICO score

Comparing Your Spending to Your Income

Chapter 3: Adopting an Attitude for Success

Believing in Yourself

Handling Setbacks

Asking for Help

Making Your Family Members Your Financial Allies

Part II : Going on a Debt Diet

Chapter 4: Building a Budget

Comparing Your Monthly Spending and Income

Tackling a Budget Deficit

Paying the Important Stuff If You Can’t Pay Everything

Examining a Budget Surplus

Finalizing and Sticking to Your Budget

Chapter 5: Slashing Your Spending and Making More Money

Finding Ways to Spend Less

Bringing in More Bucks

Chapter 6: Negotiating with Your Creditors

Getting Ready to Negotiate

Getting Down to Business: Contacting Creditors

Making the Agreement Official: Putting It in Writing

Chapter 7: Consolidating Your Debts

Knowing When Debt Consolidation Makes Sense

Considering Your Options

Avoiding Dangerous Debt Consolidation Possibilities

Chapter 8: Using Credit Counseling to Get a Grip on Your Finances

Finding a Reputable Credit Counseling Agency

Working with a Credit Counselor

Avoiding Debt Settlement Firms

Getting Relief If You Get Ripped Off

Chapter 9: Dealing with Debt Collectors

Understanding How Debt Collectors Operate

Knowing Your Options When a Debt Collector Calls

Feeling Haunted by Old Debt

Taking Action When a Debt Collector Violates Your Rights

Part III : Tackling Your High-Stake Debts

Chapter 10: Managing Your Past-Due Mortgage

Getting Familiar with the Foreclosure Timeline

Keeping a Foreclosure at Bay

How a Lawyer Can Help

Handling a Hopeless Situation

Chapter 11: Keeping Your Wheels on the Road

Running through a Repossession

Having Your Car Auctioned Off

Getting Your Vehicle Back

Avoiding a Repossession in the First Place

Hiring an Attorney

Chapter 12: Avoiding an Eviction and the Loss of Your Utilities

Keeping a Roof over Your Head

Facing Eviction

Maintaining Your Essential Utility Services

Reestablishing Utility Service

Chapter 13: Handling Medical Bills and Child Support Obligations

Appreciating the Risks of Not Paying Your Medical Bills

Taking Action to Reduce Your Medical Debt

Tackling Your Remaining Debt

Prioritizing Paying Child Support

Knowing the Consequences of Not Paying

Keeping Up with Your Obligation

Chapter 14: Catching Up on Your Federal Taxes

Respecting the Sanctity of April 15

Facing the Music on April 16

Liens and Levies: Collecting Past-Due Taxes

Chapter 15: Taking Responsibility for Your Federal Student Loan

Preparing to Pay Back Your Student Loan

Avoiding a Default

Turning Things Around after a Default

Consolidating Your Student Loans

Canceling Your Student Loan

Part IV : Avoiding Debt Problems down the Road

Chapter 16: Getting Good Credit Back

Separating Good Debt from Bad

Distinguishing Between the Different Kinds of Credit

Seeing Yourself the Way Creditors See You

Rebuilding Your Credit History

Steering Clear of Credit Rebuilding Rip-Offs

Chapter 17: Life after Too Much Debt: Staying on Track

Setting Financial Goals

Building a Financial Safety Net

Living with a Budget

Managing Your Credit

Increasing Your Money Management IQ

Assembling a Team of Financial Advisors

Part V : The Part of Tens

Chapter 18: Ten Great Resources for Dealing with Debt

American Bankruptcy Institute (ABI)

Bankrate.com

A Consumer Bankruptcy Attorney

Credit.com

The Debt-Proof Living Newsletter

DebtSmart

The Federal Trade Commission (FTC)

The National Consumer Law Center

The National Foundation for Credit Counseling (NFCC)

Suze Orman

Chapter 19: Ten Debt Don’ts

Ignoring Your Debts

Falling Behind on Car Payments

Managing Money Without a Budget

Paying Creditors Just Because They’re Aggressive

Making Promises That You Can’t Keep

Continuing To Use Credit Cards

Borrowing Against Your Home

Working with a For-Profit Credit Counseling Agency

Getting a High-Risk Loan

Asking a Friend or Relative to Cosign a Loan

Introduction

C all us clairvoyant: You’re concerned about how much you owe to your creditors. Join the crowd! We won’t even try to guess how many people are worried about their debts as we write these words. Suffice it to say the number is staggering, and it keeps on growing.

As we write, total consumer debt has skyrocketed to a whopping $2.2 trillion dollars. Data from the Federal Reserve Board shows that the annual rate of consumer debt has risen throughout this decade, driven primarily by revolving credit — mostly credit card debt. Statistics show that people in the United States now spend more than they take home; they make up the difference by drawing down their savings, using credit, or not paying all their financial obligations. These dismal facts are fueled by a variety of factors, including higher energy and healthcare costs; stagnant wages; easy access to credit; rising interest rates; inadequate savings; and poor understanding of basic money management.

Whether you picked up this book because you’re drowning in debt and looking for a financial life raft or because you’re just feeling uncomfortable about the amount you owe to your creditors, we’re here to help. In this book, we show you how to assess the state of your finances; live on what you make; get your debts paid off as quickly as possible; and deal with high-risk debts like your mortgage, car loan, and federal taxes.

When your financial problems are behind you (which will happen if you put our advice into action), we prepare you for your financial future. We walk you through the credit rebuilding process and explain the basics about credit and debt and money management.

About This Book

You won’t find any how-to-get-out-of-debt-overnight advice in Managing Debt For Dummies. We know that slow and steady wins the race. Getting out of debt takes time — months or even years, depending on how much you owe relative to your income. Despite what some ads claim, there are no shortcuts to debt reduction.

Getting out of debt may also require a lot of hard work and sacrifice. For example, for your family to meet its financial obligations without using credit, you may have to slash your spending to the bare bones and work at a second (or even a third) job.

But here’s the great news: If you follow the advice in this book, your debt will diminish. Eventually, you’ll have more disposable income, and you’ll start to gain financial peace of mind. You’ll even be able to put money away for your family’s financial future and work toward such goals as buying your own home, taking a vacation, helping pay for your kids’ college educations, and funding your retirement.

As you already know, getting into debt is easy. Getting out is not. In this book, we provide everything you need to meet that challenge.

Conventions Used in This Book

We’ve tried to make Managing Debt For Dummies as user friendly as possible. After all, you have enough stress in your life; you don’t need a book that’s tough to navigate! Here are some of the conventions we use throughout the book:

When we introduce a new term, it appears in italics. We provide a definition or explanation nearby.

We use sidebars (gray boxes with their own headings that are set apart from the rest of the text) to share information that isn’t crucial but may be interesting to you.

All Web addresses appear in monofont so they’re easy to pick out if you need to go back and find them.

Keep in mind that when this book was printed, some Web addresses may have needed to break across two lines of text. If that happened, rest assured that we haven’t put in any extra characters (such as hyphens) to indicate the break. When you use one of these Web addresses, type in exactly what you see in this book, pretending as though the line break doesn’t exist.

What You’re Not to Read

Of course, we think that every word in this book is essential reading. But we’re not going to check up on you to make sure you’re studying each chapter in depth!

You can certainly skip the sidebars if you’re crunched for time, and we hope that some chapters in Part III of this book don’t apply to you. (If every one of them does apply to you, you have our sympathy — your stress level must be extraordinary!)

Foolish Assumptions

We assume that because you’re taking the time to read these words, you’re serious about wanting to get out and stay out of debt, and you’re willing to do whatever it takes to achieve that goal. That’s great, because the road to financial health is not always smooth.

We also assume that you don’t know very much about money management. Don’t be embarrassed, and don’t let that fact prevent you from taking action against your debt. Most U.S. consumers need help with basic money management and in this book, we offer exactly that.

How This Book Is Organized

We’ve packed this book full of information and advice to help you tackle your debts and move your finances onto sounder ground, and we’ve organized everything into five parts.

Part I: Getting a Grip on Your Finances

We have three goals for this part of the book: give you an overview of what’s involved in getting control of your finances and dealing with your debts; guide you through the preliminary steps in the debt management process; and help you get your game face on.

Maybe you have been determinedly uninformed about exactly how much you owe to your creditors and how that compares to your income. Maybe you haven’t wanted to know how badly your debts have damaged your credit history. We help you face facts about the state of your finances.

We encourage you to take a hard look at your relationship with money and to determine whether that relationship has contributed to your debt problems. We also help you develop a can-do attitude about getting out of debt because your attitude can mean the difference between success and failure.

Part II: Going on a Debt Diet

In this part, you find the nuts and bolts of debt management. We walk you through the budget-building process and explain how to use your budget to manage your money. We suggest ways to spend less and make more, and we show you how to use a variety of debt management strategies that make it easier to keep up with your debt payments. We also show you how a credit counseling agency can help you (and how to find a good one), and we explain how to act when debt collectors come calling.

Part III: Tackling Your High-Stake Debts

In this part, we focus on specific kinds of debts, like mortgages, car loans, rent, court-ordered child support, federal taxes, and federal student loans. We tell you what’s at stake when you fall behind on each type of debt, and we offer options for avoiding the negative consequences.

Part IV: Avoiding Debt Problems down the Road

Ah, here’s where things get easier. In this part, we assume that most of your debt problems are in the past and, having followed the advice in this book, you’re wiser about your money now. We show you how to rebuild your credit history, build your savings, set financial goals, and use credit as a tool for managing your money and building your wealth. Here’s to a happier and financially healthier future!

Part V: The Part of Tens

What would a For Dummies book be without this part? Not a For Dummies book, we guess. First, we turn you on to an array of free and low-cost resources for finding out more about debt management and financial management in general. Then we help you avoid some of the more common mistakes consumers make when they owe too much money to their creditors.

Icons Used in the Book

Throughout this book, you find eye-catching icons that call your attention to especially important or helpful information. Here’s what each icon indicates:

The Remember icon highlights information that’s crucial. We suggest you make an effort to tuck it into your mental filing cabinet for future use.

The Tip icon alerts you to advice that can save you time, money, and legal hassles.

Make sure you read the text next to each Warning icon! If you don’t, you could face some serious consequences.

Where to Go from Here

Your debt situation may be daunting, but don’t be daunted by this book.What we explain here isn’t tough to understand. It can be tough to implement, but that’s why we help you gather your inner strength early on.

So plunge in. We suggest that you get your feet wet by starting at the very beginning of the book; in Chapter 1, we give you an overview of everything you’ll find in Managing Debt For Dummies.

But if there’s a particular type of debt keeping you awake at night, or if you’re haunted by never-ending phone calls from debt collectors, jump right to the chapters that deal with those subjects. You can always back up and read earlier chapters that provide the basic tools for debt management.

Wherever you start reading, know this: If you follow the advice in our book and stay focused and disciplined, you will overcome your debts and emerge with a brighter financial future.

Part I

Getting a Grip on Your Finances

In this part . . .

O ur goal in this book is to help you work your way out of debt, and we start that process by tackling some preliminaries. First, you need to get clear about the facts of your financial situation: Exactly how much are you spending each month relative to your household income? How much debt do you have? What do your credit report and credit score say about the state of your finances? And how do your finances stack up against the standard ratios that financial professionals use to evaluate someone’s financial health?

Facing the truth about your finances is tough, and mustering the self-discipline to make necessary sacrifices is even tougher. But don’t despair: In this part, we also give you lots of advice and encouragement to help you develop a get-out-of debt mindset.

Chapter 1

The Basics of Managing Too Much Debt

In This Chapter

Figuring out where you stand financially

Knowing what to do when you owe too much

Dealing with debt collectors

Handling your most important debts

Building your financial future

G oing into debt is as American as Mom’s apple pie and fireworks on the Fourth of July. It’s the American way! Unfortunately, if it’s also your

Many creditors claim that consumers owe too much because they’re irresponsible spenders, but recent studies tell a different story. For example, a 2006 study based on information from the Federal Reserve Board reveals that U.S. wages have been flat (after adjustments for inflation) since 2001, while the costs of such basics as housing, medical care, food, and other household essentials have increased. In other words, not all U.S. consumers are in debt because they’re spendthrifts; instead, we’ve all taken a national pay cut.