Money and Debt

Managing your debt

Not all debt is a problem, but if you are behind on paying your debts or getting debt collection calls, it can create problems. Find out what steps you can take and how to negotiate with creditors to manage your debt.

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Understanding the Basics

See what you need to know to take action.

Money you owe to a person or company is called a “debt.” The person or company you owe money to is called your “creditor.” This can be a good thing, like when it helps you pay for a house or college education. But what do you do if it gets to be too much, and you have trouble paying it back?

If you don't pay your debts, it can affect your credit. That means that it can be harder and more expensive for you to get loans in the future. 

You can also be sued by your creditor, and can end up having money taken out of your bank account or paycheck to pay your debt back. 

If you're behind on your debt and don’t act, things will likely get worse. The key is to take charge. Even if you know you can’t pay, it’s better to try to work with the people you owe money to than to ignore them.

Contact your creditor

If you are behind on your payments, or are about to fall behind, reach out to your creditor as soon as possible. Depending on the type of debt and creditor, you may be able to get some relief, including: 

  • A payment plan. You may be able to pay off one-time bills or back payments in smaller amounts over time. Call the creditor to find out if your debt might be eligible for a payment plan.
  • Forbearance, or a temporary reduction of your loan payment. 
  • Refinancing, or a new loan with a lower interest rate. 

The bill collector on the other side of the phone is human. As humans, we can all relate to the same fact: sometimes life doesn't go according to plan. If you are having a hard time with money, don't feel bad about it. Be honest about it. Often, people are willing to work something out with you. It's better for them if you can pay off your debts in the long-run, even over a longer period of time.

Get any changes to your payment schedule or debts in writing. It's important to keep records of your conversations and any changes.

Other options

If your creditor can't provide the relief you need or you want help managing your debt, there are other options:

  • Nonprofit credit counseling services. A counseling service will contact your creditors for you and create a repayment plan that works with your budget. If you enroll in one of these plans, it won’t hurt your credit score. Make sure the service is a nonprofit that does not charge you for help. Some services that make you pay for help are scams that should be avoided.
  • Bankruptcy. If you are facing severe financial problems, you may want to discuss bankruptcy with a lawyer. Bankruptcy cannot discharge all types of debt, so it's important to discuss if it can help you with a lawyer. Learn more about whether bankruptcy might be right for you. 

Forms and Letters

Find forms and letters that you can fill out yourself.

Local Government and Community Resources

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