BECOME DEBT-FREE IN 2013

Do you have more debt than you can handle? If so, you are not alone. More than a million 
families filed for bankruptcy last year. Many more sought help from credit counseling 
agencies. Others struggled to dig themselves out of debt on their own, with varying degrees 
of success. 

The first step toward eliminating debt is to assess your situation. Start with your credit 
report. Federal law entitles you to one free copy of your credit report each year. Georgia law 
allows you to receive two additional free credit reports each year from each of the three 
major credit reporting agencies. Contrary to what many people think, requesting a copy of 
your own credit report does not impact your credit score.

Your credit report is a record of your repayment history with creditors you have had in the 
last seven years. When you apply for new credit, the lender uses this information to 
determine how credit-worthy you are. The information in your credit report is a major factor 
in determining how much you will have to pay to borrow money.

Verify that information contained in your report is accurate and complete. If not, follow the 
directions provided with your report to inform the reporting agency of any errors. 

Pay special attention to any negative information found on your report such as late 
payments, judgments, wage garnishments, and charge-offs. If all your payments were on 
time for the last twelve months and you have no other negative information on your credit 
report, you can dig your way out of debt on your own. Your local Family and Consumer 
Sciences Extension Agent has information to help you develop a plan to get out of debt.

If you are adding new negative information to your credit report each month with late or 
missing payments, you need help fast. Face-to-face credit counseling is available in many 
communities, and you can get help online or by telephone throughout the United States. 

Credit counselors can usually negotiate better terms with your creditors and reduce the total 
amount that you owe. They may set up a Debt Management Plan for you, which usually 
requires closing all your credit accounts and avoiding taking on any new debt until the plan 
is complete. Your creditors will report to the credit reporting agencies that you are 
participating in a Debt Management Plan. Although participation in a Debt Management Plan 
is usually considered negative information, it is not as negative as continuing to miss or be 
late with your payments.

If you choose to work with a credit counselor, there are important questions you need to ask. 
How much will they charge for the service? Some agencies may take the payment for the first 
month as a fee, which means your creditors do not receive a payment that month. This 
arrangement damages your credit report even further and adds late fees and additional 
finance charges. Many counseling agencies offer their services for free or have very low fees. 

If you make one monthly payment to the counseling agency for your debts, make sure you 
know which of your debts the payment covers. Certain types of debt, such as automobile 
loans, home mortgages, and other secured debts are generally not included in Debt 
Management Plans. 

You also want to know how often payments are sent to your creditors. You should receive a 
regular statement showing how your payments were disbursed. Beware of counselors who 
attempt to steer you into consolidation loans. If debt is your problem, more borrowing is 
NOT the answer!

Some people have so much debt that even credit counselors cannot help. They may have 
recently experienced divorce, unemployment, or medical bills not covered by insurance and 
simply cannot get caught up. These individuals may have no choice except for the last resort: 
bankruptcy.

Georgia has the second highest rate of personal bankruptcy in the nation, behind only 
Nevada. With bankruptcy, individuals who owe more than they can repay go through the 
court system for debt relief. Some file Chapter 7 bankruptcy petitions. Chapter 7 filers are 
allowed to keep certain assets with the rest being liquidated and the proceeds used to repay 
their debts. 

Another option is Chapter 13. Chapter 13 filers work with their attorney to develop a budget 
and make monthly payments of 100% of their disposable income to the courts for a period of 
three to five years. These payments are then distributed among creditors. Nearly 8 (7.92) of 
every 1000 Georgians filed for bankruptcy in 2010.

Whether you dig your own way out of debt, work with a credit counselor, or consult an 
attorney to discuss bankruptcy, getting out of debt is one of the best investments you can 
make. Not only will you free up the money you currently commit to monthly debt payments 
and eliminate monthly finance charges, but you will also feel less stress about your finances 
and be more optimistic about your financial future.

Michael Rupured