Quick Answer: Debt turnaround requires first cataloging all debts through credit reports at annualcreditreport.com, then prioritizing finding better employment before choosing a repayment strategy. The most critical step is overcoming the emotional paralysis that prevents job searching and bill tracking.
Question:
Dear Steve,
I am several years out of college, with massive debt delinquency. It’s gotten to the point where I don’t even know how my debt is spread out. I was first scared by the bills that were arriving and I was unable to pay after failing to secure a good job. My credit has taken what seems to be irreparable damage.
What is my best bet for turning my situation around? How do I tackle debt spread across several different collectors when I hardly make enough to live? Should I consolidate the debts? and If so how does one go about that?
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Jairo
Answer:
Dear Jairo,
Please update me in the comments below so I can better assist you.
It’s not clear how much debt you even have. You might not know. If not then the best thing you can do is open the bills that arrive let’s start keeping track or go to annualcreditreport.com and get copies of your credit reports to at least see what is being reported. Credit reports are not all inclusive of all debts but they can be pretty close. Once you can post an update with some of that data you can then make a better decision.
Your first point of attack should be in hunting for that better job. This is often made difficult because of the depression and despair people feel when in debt. It’s hard to shine when you are feeling extinguished.
Once the job situation has been tackled then you can decide what is the best way to deal with the debt. You can look at my Get Out of Debt calculator to see an overview of options.
Frankly in a situation like you describe, bankruptcy is often the fastest way to start rebuilding and least expensive way to a fresh start. See Those That File Bankruptcy Do Better Than Those That Don’t.
By the way, the credit score is easy to repair once we have a solution in place to deal with the debt.
But let’s not get too far ahead of ourselves here. Gather the data and then update me below.
Know Your Rights: If a debt collector is contacting you, you have legal protections. See the complete list of FDCPA violations collectors commit most often. Use the free Debt Validation Letter Generator to demand proof of the debt, or check this collector’s complaint history with the Scam-O-Meter.
Dealing With Debt? Before you pay a collector, understand all your debt relief options — including ones the collector won’t tell you about. If the debt feels unmanageable, take the 2-minute bankruptcy quiz to see if the math favors a fresh start. Federal Reserve research shows filers recover faster than those who don’t file.
Question asked.