The ABCs of Debt

The Basics of Managing Too Much Debt

• 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

Being in debt can feel like you're spiralling out of control. Buying a new house or car, going and even taking a holiday can feel very far out of your reach. the good news is that there are solutions for you.

Okay, so consumers at all income levels are being stretched to their limits. But chances are that you haven't yet taken decisive action to improve your financial situation. Maybe you haven't even acknowledged the state of your finances, much less changed your lifestyle and become more careful about your spending. Even if you're in financial jeopardy, chances are you don't know what to do about your situation. You may be frozen by fear and confusion.

Starting here, we give you the information you need to take control of your finances and turn them around.

Taking Stock Of Your Finances

You need a clear idea of the current state of your finances in order to figure out the best way to deal with your debts. Here's how you can begin to take stock of your finances :

• Compare your monthly spending to your monthly income

Prepare yourself for a shock. Most people underestimate the amount that they actually spend relative to what they earn. By doing this comparison, you may quickly realise that you're spending your way into a hole. If that's the case, you must reduce your spending to meet your financial obligations.

Using A Budget To Get Out Of Debt

After you assess the seriousness of your financial situation, you need to prepare a plan for handling your debt, including keeping up with your creditor payments- or at least keeping up with payments to your most important creditors. One of the first things you should do is prepare a budget. No matter what your annual income, living on a budget is probably the single most important thing you can do to get out of debt and to avoid debt problems down the road.

A budget is nothing more than a written plan for how you intend to spend your money each month. It helps you

• Make sure that your limited rands go toward paying your most important debts and expenses first
• Avoid spending more than you make
• Pay off your debts as quickly as you can
• Build up your savings
• Achieve your financial goals

Later on we walk you through the budget- building process from start to finish.

Reducing your spending and making more money often go hand in hand with creating a budget.

TIP Getting out of debt usually requires that you change your spending habits. Because those changes may affect everyone in your family, if you have children (especially preteens or teens), you and your spouse or partner should invite them to help you create your household budget. They can suggest expenses to cut and things they can do to improve your family's financial situation. By involving them, your kids will be less apt to resent the effects of budget cuts on their lives. Also you'll be giving your kids the education they need to become responsible money managers as adults.

Once you have made your first attempt at your current budget you then need to go through each line item to see how you can save costs. Here are a few examples:

• Groceries - how do you shop? Firstly you can 'down-shop', moving from shopping at Woolworths to Pick & Pay or Checkers. Secondly it is important to see how you shop, do you pop to the shops every day? If you did a weekly and monthly shop and buy in bulk at shops like Macro you could see you bills reduce substantially.
• Insurance - when was the last time you reviewed your vehicle, homeowners or household content insurance? Get a competitive quote from a broker like Insurance Busters (link) to see if you are paying a fair rate. Check to see if your vehicle is worth what you are insuring it for.
• Life insurance - when did you last review this? Has your situation changed? Is it still the right cover for you? Are you just paying the 'risk element' or is there an endowment policy linked to it? For assistance with this please contact Insurance Busters (link)
• School fees
• Telephone
• Travel

Taking The Right Steps

If you don't owe a ton of money to your creditors, living on a budget may be all that it takes for you to whittle down your debts and hold on to your assets. If you owe a lot, living on a budget is only the first step in the get-out-of debt process. You may also need to do some or all of the following:

• Cut deals with your creditors

Ask your creditors to help you keep up with your debts by lowering your monthly payments on a temporary or permanent basis, reducing the interest rate on your debts, or letting you make interest- only payments for a limited period of time. At Debt Busters we liaise with your creditors for you.

• Create a list of all your debts and the relevant information pertaining to each debt. In chapter 6, we explain the specific information to include on your list
• Review your budget to figure out how much you can afford to pay on your debts every month, starting with the ones that are the most important. Don't allow a creditor to pressure you into agreeing to pay more than you think you can afford. Whenever you talk with a creditor, explain why you're calling and exactly what you're asking for. If the first person you speak with says no to your request, politely end the conversation and ask to speak with a manager or supervisor
• Borrow money to pay off debt

When you get new debt in order to pay off existing debt, the process is called consolidating debt. We realise that going into debt to get out of debt may not sound sensible, but if it's done right , it can be smart debt-management strategy. To do it right, however, all the following should apply when you consolidate:

• The interest rate on the new debt is lower than the rates on the debts you pay off
• The monthly amount of the new debt is lower than the combined monthly total for all the debts you consolidate
• The new debt has fixed interest rate
• You commit to not using credit again until you've paid off the new debt
• Get help from credit counselling agency. Debt Busters!

The advice and assistance of a credit counselling agency can be a godsend when you have a lot of debt and are struggling to take control of it. At Debt Busters we can especially help when you are confused about what to do or lack confidence about your ability to improve your finances on your own. We can:

• Help you set up a household budget
• Evaluate a budget you have already created to suggest changes that will help you get out of debt faster; avoid the loss of assets, and so on
• Negotiate lower payments with your creditors and put you into debt management plan
• Improve your money management skills

File For Sequestration

When you owe too much relative to your income, your best option sometimes is to file for sequestration, especially if you're concern that one of your creditors is about to take an asset that you own and don't want to lose.
Read more on Sequestration

Paying Special Attention to High-Stake Debts

Some debts deserve special attention because the consequences of falling behind on them are especially serious. For example, depending on the type of debt, you may risk losing an important asset, being evicted and maybe even serving jail time. Later, we give you detailed guidance regarding how to handle debts such as the following:

• A mortgage
• A car loan
• Rent or utility bills
• Medical bills and court- ordered child support and maintenance obligation
• Income taxes
• Student loans

Talk with a consumer law attorney as soon as you become concerned about your ability to keep up with payments on high stake debt. The attorney can help you figure out a way to avoid a default. If you're already in arrears and being threatened with a foreclosure, repossession, lawsuit, or some other serious legal action, you need to phone 0861 NO DEBT immediately.

Good Debt / Bad Debt : What's the Difference?

Considering that you have serious problems with debt, you may be surprised to hear this: We eventually want you to use credit cards and loans again. Why on earth would we steer you back into debt when getting out of it is such hard work? Because owing money to creditors is not necessarily a bad thing.

Whether debt is good or bad depends on why you took on the debt in the first place and how you manage it- whether you make your payments on time, for example. It also depends on how much debt you have relative to your income because too much debt, even if you're able to keep up with your payments, harms your credit history and brings down your credit score.

Why Debt Can Be A Good Thing

Going into debt can be a good thing in many circumstances. For example, you could go to your grave trying to save up enough money to purchase a home, so a mortgage is a wonderful thing- especially if the value of your home grows over time.

A car loan is another example of good debt because most of us need a vehicle to get to and from work, and most of us can't afford to purchase a car with cash. Debt is also good when it helps you build your wealth; for example, you borrow money to purchase your home or rental property. Some debt helps you save money in the long run, like getting a loan to make your home energy efficient so you can reduce your energy bills.

Why Debt Isn't So Good

Debt is detrimental to your finances when you run up your credit card balances in order to live beyond your means or to purchase goods and services that don't have any lasting value for you or your family. For example, restaurant meals, happy, clothing, jewelry, and body care services don't have any lasting value, but they sure can run up your credit card balances.

Debt is negative when you have so much debt that you can't afford to make the repayments(especially when your home is at risk), or when you borrow money from cash business on street corners who charge very high interest rates.

Distinguishing Between Types Of Credit

You may think that all your credit is created equally. Lots of people think so, which is one of many reasons they run into debt problems. In this section, we brief you about various types of credit.

Here are the types of credit you should be familiar with:

• SECURED: With this kind of credit, the creditor guarantees that it will be paid back by putting a lien on an asset you own. The lien entitles the creditor to take the asset if you don't live up to the terms of your credit agreement. Car loans, mortgages, and home equity loans are common types of secured credit.
• UNSECURED: When your credit is unsecured, you simply give your word to the creditor that you will repay what you borrow. Credit card, medical, and utilities bills are all examples of unsecured credit.
• INSTALLMENT: With installment credit, you borrow a certain amount of money for a set period of time and you repay the money by making a series of fixed or installment payments. Examples of installment credit include mortgages , car loans, and student loans.

Seeing Yourself Through A Creditor's Eyes

To be a savvy consumer, you also need to know the criteria that creditors use to evaluate you when you apply for new or additional credit. Although creditors may take other factors into account, following are the three biggies:

• Your character: Does your credit history show that you've got a history of repaying your debts? Are you up to date with your repayments? No arrears, no short payments or late payments?
• Your financial capacity: Can you afford to repay the money you want to borrow? Under the National Credit Act (NCA) lenders now have to do a full 'affordability test' to see whether individuals can afford to borrow the funds they are applying for.
• Your collateral: if you have a poor credit history, or if you are asking to borrow a lot of money, creditors want to know whether you have assets that you can use to secure your debt or guarantee payment

Remember! These criteria not only determine whether a creditor will approve or deny credit; they also impact how much credit you're given, what your interest rate is ,and what other terms of credit apply.

Building A Better Credit History

Right now, when you're smothered by debt, you may not be able to think about improving your credit history - you've got too many other immediate concerns. But tuck this topic into the back of your mind because when you've had money troubles, rebuilding your credit history is essential to getting new credit with attractive terms.

The credit rebuilding process, which we walk you through in chapter 16, is quite simple: You get small amounts of new credit and repay the debt on time. For example, you get a Master Card or Visa Card, use it to purchase some goods or services you need and pay off your card balance as according to your agreement with the card issuer. You should also borrow a small amount of money from a bank and pay off the loan according to the terms of your agreement with the lender.

As you do these things, you add new positive information things to your credit history. Meanwhile, the negative information in your credit history gradually begins to disappear because, with a few exceptions, most damaging credit record information can be reported for only seven years and six months. As time passes, your credit history will gradually contain more positive than negative information, assuming that you manage your finances responsibly.

Why is rebuilding your credit history so crucial? First, if you have a negative credit report, you won't qualify for credit card with a low interest rate, and you'll have trouble borrowing a significant amount of money from a bank. Here are some other potential consequences of a negative credit history:

• Potential employers who review your credit record as part of the job application process may not hire you. You could also be denied a promotion with your current employer if it checks your credit report as part of the process.
• Life insurance companies may penalise you by charging you a higher premium or not selling you as much insurance as you would like.
• Landlords may not want to rent to you.
• You may not be able to get a security clearance or certain types of professional licenses.

Using Other Financial Management Basics

As you know all too well, life is full of twists and turns. You may initiate some of these changes, but others come at you with no warning. Either way, having a good handle on the basics of money management helps you keep your finances on track and cope with the inevitable bumps in the road.

Here are some of the financial basics you should have under your belt.

Setting and achieving your financial goals. The problem: There's a gap between what you'd like to achieve with your money and the actual money you've got available. The solution: Set ( and work towards) financial goals.

Goal setting involves deciding what to do with your money, setting realistic time frames for achieving each goal, and deciding how you'll accomplish them. You may decide to work towards achieving several goals at a time, or you may focus all your efforts on attaining one very important and relatively costly goal, like owning your home.

Building a financial safety net. As you start your financial recovery, one of your first goals should be growing the balance in your savings account. Having money in savings means that you can pay cash instead of going into debt for expenses such as car repairs and home maintenance. The money in your savings account can also help you weather a job loss. Financial experts advise that you stash away a minimum of 10% of your take-home pay every month and to build a cushion of 3 to 6 months salary that is easily accessible.

Using a budget. Even as your finances improve, don't throw away your budget! As we explain in chapter 4, there is no better money management tool than a budget. Even if you're so successful at conquering your debt that you end up with lots of disposable income, we want you to continue to use a budget to plan your spending and monitor what you actually do with your money each month.

REMEMBER You're far more likely to achieve the financial goals you set for yourself if you build them into your budget than if you just wing it.

• Being a responsible money manager. As your finances improve, don't get sloppy about the way you manage your money. If you do, you could end up right back where you are today as you're reading these words. Avoid backsliding by setting financial goals, having enough money in savings, and living on a budget. Also, make these truisms part of your daily life:
• Whenever possible, pay with cash, not credit.
• Pay your bills on time
• Don't run up your credit card balances.
• Don't treat your home equity like it's a piggy bank.
• Becoming a lifelong money learner. The financial management guidance we provide in this book is really only the tip of the iceberg. There is a lot more to uncover, and fortunately, you've got access to countless recourses for additional education- books, magazines, newspapers , the web, classes at your local college, and so on. For a sampling of the possibilities, see chapter 18.

Being smart with your money requires a lifelong commitment because the law that pertain to credit and debt change over time, as do laws that apply to other aspects of money management, such as taxes and investments. Also, as you age, you'll have different financial needs and different relationship with your money. For example, even if you aren't thinking about retirement today, we promise you will someday!

• Relying on professional advice and assistance. No matter how much you learn about money management, you're never going to know as much as financial professionals like CPA's financial planners, insurance agents and brokers, and estate-planning attorneys. At times, you're going to need the advice and assistance these pros can give.For example , they can help you avoid paying too much in taxes, get your retirement planning on track, save for your child's college education, purchase the appropriate types and amounts of insurance, avoid costly money mistakes, and tackle estate planning (your estate is simply all the assets you own, regardless of their value.)

Answering Some Questions

You'll get a general sense of the severity of your debt problem by honestly answering the following questions. The more often you answer 'yes," the more you have cause for concern.

• Are you clueless about how much money you owe to your creditors?
• Over time, is a growing percentage of your household income going toward paying your debts?
• Do you ever pay your bills late because you don't have enough money?
• Have you stopped paying some of your debts?
• Are you paying only the minimum due on some of your credit cards because you can't afford to pay more?
• Are you using credit and/ or credit card cash advances to help pay debts and/ or your basic living expenses, like groceries, rent, utilities and so on?
• Have you maxed out any of your credit cards, or have any of your cards been cancelled for nonpayment?
• Do you have little or nothing in savings?
• Have you borrowed money from friends or relatives to pay your bills?
• Have debt collectors begun calling you, and/ or are you receiving threatening notices from some of your creditors?
• Are you having a hard time concentrating at work because you are worried about money?
• Are you losing sleep because of your finances?
• Have you and your spouse or partner begun fighting about money?
• Are you drinking more or using illegal drugs in order to try to cope with your money worries?

Materialism Equals Success

You may have the misconception that you are what you buy, which means the more you spend, the more successful and important you are. It's easy to develop that mindset because we are bombarded with messages that equate money and stuff with success. How often do you see ads promoting frugality, saving, or self- denial?

If you're hanging with a fast set and struggling to keep up, it may be time to re-evaluate your friendships. Trying to keep up with the Joneses may be driving you into the poor house.

Recognising Emotional Spending

Maybe you spend money for emotional reasons. For example, think about what you do when you feel sad and disappointed, or when you want to celebrate a success. Do you head to the mall or click on your favourite retail Web site? Do you treat yourself to an expensive meal or enjoy a weekend getaway even though you really can't afford it?

Comparing Your Spending To Your Income

Here comes the real measure of the state of your finances: Figuring out how your total spending compares to your total household income. You may be in for a shock. Are you ready?

Gethering The Necessary Materials

To complete this exercise, you need a pad of paper, a pen or pencil, and a calculator. You also need the following financial information:

• Check registers
• Bank statements
• Receipts for major purchases not made with a credit card
• Credit card expense records for the past 12 months

You also need records of your income for the past 12 months, such as pay slips and deposit slips or direct deposit information. If you're self employed, you need your business records.

Remember

Your spouse or partner should gather up the same information because the goal of this exercise is to give you as complete a picture as possible of how your household spending compares to your household income.

Categorising Your Expenses

Create a worksheet modelled after the one at the end of this chapter. Doing so will help you organise your spending and income information and make sure that you don't overlook anything. The worksheet divides your spending into three categories:

• Fixed expenses: These are expenses that stay the same from month to month. Examples include your rent or mortgage, car loan and insurance.
• Variable expenses: These types of expenses tend to vary from month to month. Examples include groceries, petrol, utilities, restaurant meals, movies, cd's, books and so on.
• Periodic expenses: These kinds of expenses may be fixed or variable. The difference is that you pay them just once in a while, such as quarterly, every six months, or annually. Education fees, some insurance premiums, property taxes, and dues are common examples of periodic expenses.

Some of the expenses listed as fixed spending on the worksheet may actually be periodic expenses for you. For example, instead of paying your car insurance every month, you may pay it every quarter.

After you've calculated total annual amounts for each of your debts and for all your living expenses, transfer those dollar amounts to the appropriate lines on your worksheet.

Figuring Out The Fritter Factor

It's easy to fritter money away: a latte here, a happy hour drink or two there, lunch out with friends, some new clothes. Before you know it, it's the end of the month and you don't have any money left in your checking account. Where did it all go? Most likely, you unconsciously frittered it away on unnecessary, miscellaneous items. Each purchase may not have cost much, but together over a month's time, they add up to a significant amount.

Tip To help you get a handle on how much you fritter away, for one month we want you to write down everything you purchase with cash, a debit card, or a credit card. Your spouse or partner should do the same. Carry a small notebook with you whenever you leave the house so you can record every expenditure right away instead of trying to remember it later.

After the month is up, add up everything you spent on nonessential items. We bet you'll be surprised to see how much it amounts to.

Multiply this number by 12, and put that number in your worksheet under "Variable Spending" section.

Believing In Yourself

You have to believe that you have what it takes to turn your finances around. Here are some highly effective strategies to boost yourself and your state of mind:

• Draw strength from tough challenges you've faced and dealt with in the past.
• Everyone out there has dealt with a highly stressful situation before, such as a divorce or break up, the death of a loved one or a major disappointment in your career. Think about what you did to get through these tough times and use those memories to remind yourself of your strengths and abilities. Negativity tends to spread, set an example in your household by being positive about the situation.
• Keep in mind that you are not the only person who has ever experienced financial problems. Millions of people have been where you are, they have managed to get out of debt, so can you!
• Get inspired! Watch a movie or read a book about someone that has overcome a difficult situation. E.g. Nelson Mandela or Pursuit of Happiness
• Visualise your future. Motivate yourself by visualising that you are financially stable and enjoying the freedom that a debt-free life has to offer.
• Don't stay quiet. You don't need to shout it from the rooftops, but it is a good idea to share your financial troubles with close family and friends. This will give you relief and take a load off your shoulders. You might also find that they have been in the same situation and will be able to provide you with the support and encouragement you need.
• Boost your self confidence by learning more about money. Take a basic finance class, or read a good book on the subject. Visit financial websites and get yourself clued up, knowledge is power!
• Be realistic. Don't expect to pay off your high interest debt, build your savings account and have extra money to spend by next week. Depending on your circumstances, tackling debt could take months or even years. As long as you're serious about your finances you will see gradual improvements.
• Redefine success. Society and the media want us to believe that 'buyingstuff' and expense things equal will give us success. But, do these things really make you happy? The true measure of success is on your personal relationships, being a good parent, friend and spouse. Being kind to others and helping out where you can. Money can't buy any of these things or bring you the happiness they do.
• Don't make excuses. You can't afford to make excuses! Does this sound familiar: 'I don't have time to find cheaper insurance.' 'Sticking to a budget is so much work.' 'I can't earn more money right now,' If so, you need to adjust your attitude and way of thinking today! Making excuses will only take you a few steps back, definitely not forward!

Handling Setbacks

Along the road to financial stability you're bound to come across a few bumpy patches. You might get tired of always watching every cent and saying no to your kids. Maybe one of your creditors is refusing to come to an agreement. Of course you're going to feel down in the dumps, but what can you do about it? Plenty:

• Celebrate each success. Celebrate your successes no matter how small - maybe you've managed to get one of your creditors to agree to less interest, or you've got a part time job to bring in extra money. Every success is another step towards financial freedom. Make sure you acknowledge them and praise yourself for them, this will help keep you motivated.
• Stay active. Exercise is a fantastic way to relieve stress and clear your mind. So if you're not feeling great, go for a walk instead of slumping in front of TV. Don't let the negative feelings take over.
• Laugh. Find things to laugh about, watch a comedy. Laughing is therapeutic and takes your mind off your troubles for a few moments.
• Get out and do something fun. There are many ways to enjoy yourself without having to spend money. Take your kids to the park, walk your dogs, play board games, have a bring and braai.
• Count your blessings. Appreciate and draw strength from the good things in your life. Volunteering at a shelter or visiting the townships is a great way to get rid of the 'poor me' attitude.
• Accept what you can't change. If your financial circumstances are the result of do is let it go and move forward There is no point looking back - much better to focus 100% on your future. You can't change what happened and by dwelling on it, you'll just create more negativity for yourself.
• Find a quiet place. Whether it's a church, synagogue, mosque, your house, the beach etc, find a quiet place where you can be peaceful and rest your thoughts. Visualise your life progressing and becoming easier, and it will! If you are experiencing more than just the occasional blues, you could be suffering from depression. Depression is a disease and can be effectively treated. Look at the following signs of depression:
• Feeling sad all the time
• Feeling worthless, hopeless and/or guilty for no rational reason
• Constant anxiety and/or irritability
• Lethargy
• Loss of interest in the activities you used to enjoy
• A change in sleep patterns
• Difficulty concentrating
• Excessive headaches/stomach-aches
• Loss of appetite or over eating
• Using alcohol or narcotics to avoid reality
• Constantly thinking about death or even suicide. If you have these thoughts get help immediately. Call Lifeline on 0861 150 1500 and a trained counsellor will provide you with the help you need.

Make Your Family Your Financial Allies

If you're the primary money manager in your family, you will probably shoulder all the responsibility for turning your family's finances around. However, that does not mean you shouldn't involve the rest of your family in the effort. The cooperation of your spouse or partner is essential. Although you may pay the bills each month, you and your spouse or partner both spend your family's money, so he or she has a very direct effect on the success or failure of your get-out-of-debt program.

You should also be honest about your family's finances with your children. They don't need to know all the details, but if your children are old enough to see the money-related tension and anxiety in your household, you need to tell them what is going and what you are doing to improve things.

Pulling Together With Your Spouse Or Partner

The support and cooperation of your spouse or partner is essential to getting your family's finances back on track. One of you can't be pinching pennies while the other is spending like there's no tomorrow.

If you and your spouse or partner have trouble talking calmly about your family's financial problems and what to do about them, avoid letting your conversations degenerate into arguments. When you talk to your spouse or partner about your debts, try to stay focussed on solutions instead of blaming.

Help your children maintain a sense of security by explaining your family's financial situation and what they can expect in the months to come. Take their ages and maturity levels into consideration when you decide what to say and how to say it. Be careful not to scare them.

Regardless of the age of your children, reassure them that things may be different for a while, but you love them and everything will be okay. Help them feel safe by letting them know that you and your spouse are putting a financial plan together, by keeping their day-to-day routines as unchanged as possible, and by doing fun things together.

Be alert to signs that your family's financial problems are creating a lot of stress in your children's lives or that they are becoming depressed. Signs of trouble include crying, angry outbursts, withdrawal, behaviour problems at school, headaches, stomach-aches, not wanting to go to school. Try to get your kids to talk about what is bothering them. If they won't, or the symptoms get worse, they probably need to meet with a mental health professional.

As you help your children cope with your family's financial circumstances, bear in mind that your money troubles offer you an opportunity to teach them important lessons about managing money and the dangers of too much debt. When they become adults, they may be able to use those lessons to avoid financial trouble. A good way to teach them responsible money practices is getting them involved with drawing up the family budget.

Building A Budget

A budget is nothing more than a written plan for how you intend to spend your money each month. How much you'll contribute to savings and retirement and so on. A budget helps you live within your means. When you're drowning in debt, it's your financial life raft.

Over time, if you stick to your budget and follow the rest of the advice we are providing, your financial situation will improve. But even after your financial situation is looking better, you should continue to manage your money by using a budget. Otherwise, you may get careless about your spending or begin using credit too much, and the amount of your debt may begin creeping up to dangerous levels again.

Living on a budget will also make it easier to:

• Build up your savings so you have money to fall back on if you are hit with a big unexpected expense, lose your job, or have to take a pay cut.
• Purchase big-ticket items with minimal use of credit
• Help make your family's financial dreams come true - a new home, great vacation, college educations for your kids, a comfortable retirement.

So let's get started with building your budget!

Comparing Your Monthly Spending and Income

Creating a monthly budget for your household is not a complicated process, but it can be time consuming. Simply stated, here's what you need to do:

• Compare your current total spending to your current total income
• Reduce your spending as necessary so it's less than your income
• Allocate your money appropriately so you are able to pay all your living expenses and debts.

Get The Family Involved

By being open and honest with your family about your financial situation, you will not only feel relieved that the load is shared and you don't have to pretend that everything is fine, you will also give them a better understanding making it easier for them to accept the changes that need to be made. Sit down as a family and talk about why your family needs to live on a budget. Share with your kids your income and expenses, let them know how much less your family needs to spend each month. Ask your kids for budget cutting ideas , including things they are willing to give up. Also, discuss any budget cuts you plan to make that will directly affect them.

Cut Spending and Make More Money

If your monthly expenses are greater than your income, it is definitely time to clamp down on your spending - AND stop using your credit card! This also applies if you are barely getting by each month and paying the minimum on your credit cards... as well as putting a little or nothing into your savings.

Finding ways to increase your family's income can also help a great deal. Working another job or increasing your hours on your current job may be things to consider.

In this section DebtBusters brings you a host of ideas and ways to spend less. Organised in categories of everyday expense: housing, utilities, food, transport, healthcare and so on. Although some are small and simple they can yield great benefits over time.

It is important not to focus on what you're giving up, but what spending less will get you in the end. And after giving up a few "essentials" you might even find that you don't even miss them.

Example: using public transport to commute to and from work actually gives you time to read, think, or even catch an extra half an hours sleep, instead of battling your way through traffic and incidents on the road.

Before we address specific areas of your budget here are a few tips:

Although you should always shop at sales, don't just buy an item because it's discounted. As with all shopping, always think to yourself, do I need this? Will I get any use out of it?

If you absolutely can't resist a sale and buy items for the sake of buying, you may have a spending problem. People with spending problems feel good at the time of purchase and then guilty and remorseful later. It becomes like a series of highs and lows. This is nothing to be embarrassed about, many people worldwide deal with exactly the same issues. It is in your best interest and the best interest of your family to seek help. You can speak to a psychologist about this or visit www.debtorsanonymous.org for more information.

Housing is definitely the biggest item in your budget, especially if you're a homeowner if you take into account the cost of maintenance, repairs, insurances and taxes. The good news is that you can reign in your housing costs in many ways:

• If you're close to the end of your lease, find a cheaper place to live. If not, read your lease agreement carefully to find out how much it costs to break it and move out early.
• Move in with your parents or other relatives while you work on improving your finances.
• Stay where you are but get a roommate to lessen cost.

• Rent out an extra room in your house.
• Lease your home and move into a commune with friends, or a relative's house. Make sure the rent you charge covers your bond repayments as well as insurance, property insurance as well as routine maintenance and repairs.
• Sell your home. We know this may seem drastic but if you are paying for a house you truly cannot afford, getting out from under the debt is a good thing.

The costs of utilities can be totally excessive and most of the time there is no reason for it to be. We tend to waste a substantial amount of money on utilities out of habit, for example having a really long bath every evening, or keeping the heater on when not in the room.

• Find out if your local municipality offers free energy audits to find out if your house is losing energy, if so find out where the problems are and fix them.
• Replace old showerheads with new low-flow heads
• Use fans not an Air Conditioner to cool your home
• Hang up clothes to dry instead of using a tumble dryer. Not only is this less expensive but hot air wears out your clothes more quickly.
• If you need to replace your washing machine get one that loads from the front rather than the top, this will save you up to 50% on energy as well as save water.
• Take showers rather than baths and limit the time of your shower.
• Never run a dishwasher that is only half full of dishes.
• Fix any leaky taps.

Reducing your food costs is the easiest way to save money. Eating more homemade food rather than packaged foods or take-aways will not only save you money but also be healthier, helping you to shed a few kgs!

• Plan out your meals for the following week or two according to your budget. Go to the grocery store with a least of exactly what you'll need and buy no extras.
• Minimize your shopping trips. The more you go to the store the more you will spend.
• When you make a meal double the recipe and keep half in the freezer. When you have a long day at work or are feeling exhausted you may be tempted to order out, this way you will have a meal waiting for you.
• Shop around. Look out for specials and discounts and compare which shops are cheaper on certain items.
• Purchase no name brands. The product you buy will be exactly the same quality but you won't be paying for elaborate branding and packaging.
• Stay away from pre prepared foods and convenience items, you pay more for them.
• If you drink regularly, drink less and buy less expensive wines and hard liquor.
• When practical, buy in bulk. Visit local warehouse and discount store whenever possible. Don't buy perishable items in bulk unless you are sure that they will be used.
• Instead of buying lunch at work every day, or giving your children money for school lunches, pack lunches for you and your family. If you don't have time in the morning do this at night, and get your family to help!
• Wake up 5 min earlier and make your own morning coffee at home instead of buying it on the way to work.
• Eliminate fizzy drinks and junk food from your diet. These items are more expensive than the more healthy food available.
• Go out for dinner on special occasions only, and remember with a little bit of effort you can make dining at home a special occasion.
• Celebrate with a picnic rather than a dinner at a restaurant.
• For a night in with a range of DVDs, pop your own popcorn. The old fashioned home-made popcorn tastes alot better and is a whole lot cheaper than the pre-popped variety.
• If your family goes out for the day, or if you're driving to your holiday destination, pack your lunch instead of stopping at a restaurant.
• Grow your own fruit and vegetables. If this isn't possible, buy your greens from a farmers market.

After the cost of housing your second biggest expense is transport. With fuel prices rising and rising it makes sense to look for alternative transport.

• Use public transport. As South Africans we are generally always worried about crime but there are very safe methods to work around this concern. Generally trains and other forms of public transport are the safest at peak times (early morning and in the evenings after work). It is also a good idea to travel in a group, ask around at work and see who else takes or is interested in taking transport with you. You could actually really come to enjoy taking transport as you don't have to fight your way through traffic or incidents on the road, you can sit and relax, read or even catch a few more minutes of shut eye.
• If you have a shop up the road and your area is safe, why not take a walk up instead of driving only a few metres? The exercise will be good for you too.
• Find a reliable mechanic that won't charge you an arm or a leg for repairs. Ask people you know, especially those that drive similar cars to yours.
• Ask your older kids to pitch in for their own petrol. If they don't have part time jobs while studying etc, they need to get one ASAP. This will help out your financial situation considerably and will be good to teach them about work ethic and handling their own money.

For alot of people out there it may be time to face the facts. Smoking and drinking are unnecessary expenses. And expensive they definitely are! They don't call it 'sin' tax for nothing. If you sit down and work out what you spend on smoking for a month you would be horrified. To demonstrate our point we'll do it for you: the average smoker buys a pack every two days at an average R24 (this figure keeps going up), that is a total of R4368 per year on cigarettes, and that's 10 cigarettes a day, if you smoke more expect to double and triple that figure.

And the same goes for alcohol. If you drink regularly the cost of the wine or whatever it is you enjoy could be highly expensive. Try changing to a cheaper brand, cutting down or preferably stopping all together.

It goes without saying that curbing on these expenses will be beneficial to your health as well as your expenses.

Always remember that reducing your budget doesn't mean that your family can't have fun together and eliminate enjoyment form your lives. It's all about taking the time to find alternative more cost effective ways to enjoy yourself.

• Use your public library instead of buying books and DVDs. Swapping these items with your friends and family is also great as they can recommend what they think you'll enjoy.
• Get back to nature. Sometimes the simple things in life can bring immense joy. Take your dogs for a walk. Ride your bike with your kids. Go fishing. Enjoy a hike, or simply go for a picnic and enjoy the sunset. It will amaze you what a bit of fresh air and light exercise can do for the mind.
• Have fun the old fashioned way. Play board games. Put together a puzzle. Scrapbook or create a photo album. Do a crossword. If you get creative you can find very interesting ways to entertain your friends and family.
• Have a bring and braai.
• Make a deal with your friends with young children to trade babysitting nights with you for free, so you don't have to pay an aupair or babysitter.

• Do your own manicures and pedicures or get together with a friend and do each others.
• Cut and colour your own hair. Get the style you want done professionally and then trim and maintain it at home. Look around at Hair Colleges, student hairdressers often offer low cost hair cuts for experience.
• Eliminate expensive cosmetics. Most of the time you are paying for the fancy packaging and a cheaper brand basically does exactly the same job.
• Wax and pluck your own eyebrows. Buy wax strips from your local supermarket in the cosmetics isle. All you need to do is then cut the wax strip into the shape you want your eyebrow to be, rub it in both hands to make the wax warm, place it carefully on your eyebrow following the arch etc. Rub it on and peel off against the grain. Simple and it'll cost you about 50c a wax strip compared to R50 a time at a salon. That's 20 times less than going to a salon.
• Do your own facials at home. Wash your face thoroughly removing all make up. Boil your kettle. As the steam starts to rise, place your face directly above about 20cm away from the top of the kettle. Hold it there for about 5 to 7 min. The steam will open your pores and help to remove impurities. After that use an exfoliator to get rid of dead skin cells and then apply a face mask to refine the skin tone. There are very affordable products on the market that are actually an exfoliator, wash and face mask all in one, all depending on how you apply them and how long you leave them on for. Your skin will be smooth, clear and glowing, just like you stepped out of a salon.
• Water 'em down a bit. There is absolutely nothing wrong with watering down your products to make them last longer. Especially when it comes to shampoos and conditioners, a little bit of water won't make any difference to the quality.
• Girls easy on the make up! Although as women we believe that make up has been given to us by god to hide our flaws and make us superhuman, there is no need to pile it on every day. Not only is make up expensive but there is alot to be said for the natural look. Save your dramatic look for a night out or a party.
• If you belong to a gym, consider finding one with cheaper rates. Also outdoor exercise is just as effective. Cancel your membership and go for a run a few times a week with a friend. Do your sit ups, lunges and push ups at home in front of TV. Look around for exercise manuals in magazines and on the internet and follow the programmes at home.

With a little creativity, planning and time to shop around you can be looking like a million bucks for as cheap as humanly possible.

• Only shop for clothes when you truly need them, not out of boredom or fun.
• At the end of each season make a list of which items you need to replace as they are worn out or your kids have grown out of them. Then take advantage of end of season sales!
• Check out thrift stores and jumble sales, especially if you're going for the vintage funk look, you can find some hidden gems if you look, most of them will just need a good wash and an iron.
• Buy at sales and at discount stores! Although the shopping experience may not be the same as at a fancy boutique, you will find similar if not the same trends at discounted shops. South African discounted shops have actually been voted as more fashion forward than most of their expensive counter parts. Only difference is the quality of display which means you will have to look a little harder.
• If you have the time and skills, make your own clothes, who knows you could start developing a sideline business!
• Mix and match, get creative with your cupboard. When you throw something on in the morning when you are still half asleep you'll probably end up wearing the same outfit combinations week in and week out. Take 5 minutes at night and have a look through your clothes and mix and match, a different colour belt can change the outfit completely, adding a scarf, different accessories, trying a different top etc. This way you won't look or feel like you are always wearing the same old stuff.

Over the past decade or so, the amount of money you spend on staying in touch has probably increased dramatically. With the way in which technology is constantly progressing it's understandable. With the amount of packages and deals available today, it should be pretty easy for you to cut down on your phone costs, here are some suggestions:

• Shop around for the best deal available. Check out the various service providers website, once you have a good idea of which one offers the best value for money, go down to one of their stores and speak to one of the sales staff about which packages are on offer and find the cheapest deal. Putting in a little time and effort could save you heaps in the long run.
• Cancel your landline and go with an internet-based service through companies such as Skype. The tend to offer a flat fee but may require that you have high-speed internet access and a headset. So do a little investigation and see which alternative will be the most cost effective.
• Make sure that your calling plan suits the way you communicate. If you mainly sms, go for a deal with a big sms bundle, if you mainly call on weekends, go for a deal such as the weekender.
• If your older children have cell phones make sure that their bills are limited. Put them on pay as you go and tell them to contribute to their costs.
• Review any extras that you're paying for and ask yourself if they are really worth it.
• Minimize your use of directory assistance, do it the old way and look in the yellow pages.

If the cost of prescription drugs is taking a big bite out of your budget, there is no need to stop taking the medication you need. Follow our advice for reducing what you pay on your meds.

• Ask your doctor if there is a generic equivalent to the medication you need, or if there is a less expensive alternative. Many newer drugs are more expensive than their older equivalents, but they are not necessarily better.
• If you are on medical aid and you take your meds every month, speak to your doctor about going onto a chronic medication scheme, it will be far cheaper and all your doctor needs to do is fax a letter to your medical aid.
• Talk to your doctor about prescribing a higher dose of the pills you normally take, then using a pill splitter, split the pills to your normal dose, this means you will not have to refill as often cutting down on refill costs. But only do this with your doctor's consent.
• Shop around before you get your prescription filled, you might be surprised at the range in prices from pharmacy to pharmacy.

Maintaining your insurance cover is essential even when you need to cut back on your budget. Without it, a serious illness, car accident, fire or break in to your home could be financially devastating pushing you into bankruptcy.

Shop around for the best deal on insurance. There are so many insurance companies out there you are bound to find a few that are cost effective and suit your needs. The best way to do this is through your independent broker; you will receive a host of quotes and choose the best one.

Also make sure you are getting all the discount and benefits offered by you insurance company, do a little research, most of them state their benefits etc on their website. For example if you purchase your home and car insurance from the same company you could receive a discount.

• When you insure your home, don't count the value of the land your home sits on. Insure the structure only.
• Find out what will save you money, example by having a security system, trellis doors or smoke detector.
• If the smoker in your family has moved out or has kicked the habit, inform your insurance company. Smoking is one of the lead causes for house fires, so you should receive a cut in costs.

• If your car is old and not worth very much, drop your coverage so that you're not paying any extra than you need.
• Be sure that you are once again getting all the discounts and benefits entitled to you. Example driving in a car with airbags and an anti-hijacking system will save you money, as well as if you park in a locked garage rather than the street at night.
• If you have to buy a new car, just remember that high performance/high profile cars cost more to insure. Buy something sensible, something your granny would buy :)

If slashing your spending still doesn't free up all the money to meet your financial obligations, and then look for ways to increase your household income. Work extra hours at your current job, take on a second job, do some freelance work after hours.

If your spouse or partner is a stay-at-home parent and he or she is considering taking on a job, just consider the costs of childcare, transport etc, make sure that it is financially worth it.

Your current employer may just be an immediate source of additional income. If you are paid by the hour let your boss know that you will want to work extra hours. If you do shift work, speak to your boss about picking up additional shifts.

Asking for a raise is another option, assuming you can justify your request. For example, a raise may be in order if you haven't received one in a long time, if you have assumed extra responsibility with no compensation, or if you have recently completed an important project. Other possible reasons to ask for a raise, is include a stellar performance review and the fact that co-workers in your same position may be paid more than you.

Another way to earn more money at your current job is to let your boss know that you want to be considered for a higher paying job in the same department. If you're qualified to work in other departments make a time to meet with the managers of those departments to let them know that you are interested in working for them.

Remember, the absolute worst that can happen is, you get turned down, which means you've lost nothing. Even if that's the case most employers appreciate ambition and initiative, the next time something comes up you will definitely come to mind. And you never know, if all goes well you could be sitting with a nice fat increase. Be confident and don't let yourself fade into the background.

Getting a better paying job with a new employer is another obvious way to boost your income. Here are a few tips for starting a job search.

• Get your CV into shape. Make sure your CV has all the relevant information, all of your skills are listed, your responsibilities at each job you've had, appropriate reasons for leaving and wanting to leave your current job, reliable references. Employers appreciate a well thought out and laid out complete CV. It is their first impression of you, so make it a good one.
• A short, snappy cover letter is a good way to start. Don't bore them to death with your life history, a short description of what you're about and what your strengths are along with why you think you'll be perfect for the job being offered is perfect.
• Always be polite and courteous on your cover letter, Dear Sir/Madam, Dear (the persons full name), or To Whom It May Concern. Thank them for their time and leave your contact details at the bottom of the letter, don't make them search for your contact details.
• Make sure you are listed and searchable on all the job sites such as www.careerjunction.co.za etc. Get the workplace on a wed and use Gumtree, Bizcommunity and even a plain Google search. Tell your friends and family that you're looking for work and to keep their ears open.
• Approach various recruitment agencies in your area and go in for an interview and explain what you're looking for. This is free and they will approach potential employers for you and set up an interview. If you get the job they receive a fee from the employer, not you.

NB: If you signed an employment contract with your current employer, they might prohibit you from taking on a second job in a specific field or taking on a second job at all.

Throwing another job into your already hectic life can be quite concerning, here are a few ways to help you cope:

• Ask your spouse/partner or older children to assume more of the household responsibilities.
• Create a schedule of when things need to be done and place it up in a central point in your house - by the front door or on the refrigerator always works well.
• Accept the fact that for now certain things around the house may fall through the cracks and not be done according to your standards, but it will pay off in the long run when you are totally debt free and can live a worry free life again.
• Make casseroles, cottage pies and soups that you can freeze and feed your family for a few days.
• Try finding a second job that you enjoy doing; something related to a special interest or hobby of yours, this will make it alot easier to be motivated towards it.
• Avoid taking a highly stressed second job that is demanding and pressurised - you already have a main demanding job, you don't need another one.
• Look for a second job that is either close to your home or main job so that you don't spend alot of time commuting.
• When you have any down time make sure you recharge and rest properly.

Depending on what your skills are you may be able to boost your income by doing part time freelance work. Freelancing means you are self employed and you offer your services to other businesses. For example, graphic designers, copywriters, software designers can freelance with their skill sets.

Working for yourself can sound appealing and can be quite profitable but if you need immediate cash, it's probably not the best bet.

• Prepare information explaining your services.
• Decide how you will charge for your services (by the hour, by the project, or on a monthly retainer) and how much you will charge.
• Let potential clients know about your services and hope that they contact you.
• After you are hired invoice your client and hope that they pay you quickly.

To be a successful freelancer and hold down your main job, you must be organised, discipline, the ability to multi-task and a bit of luck.

• Speak to people that are already freelancing and get there advice and guidance.
• Let your former employers know that you are looking to pick up some freelance work.
• Look around on the net. There are quite a few sites out there where you can register as a freelancer and bid on projects. Just Google 'freelance work'.

Negotiating with Your Creditors

If slashing your spending, making more money and living on a strict budget aren't enough to solve your financial difficulties... it's time to contact your creditors. You want to find out if they will negotiate a new, more affordable debt repayment plan.

At DebtBusters we negotiate with your creditors for you. All you need to do is work with us in order to gather all the information we need to do this successfully. We can guarantee that most if not all of your creditors will be willing to sit down at the bargaining table. Even so, just a few concessions from your creditors could make the world of difference to your finances.

• We will create a detailed list of all your debts
• Decide which debts to negotiate first and what you want to ask from each of your creditors.
• Review your budget or create one if you don't have one.
• Pull together your relevant financial information.

For each debt on your list this is the information that will be listed:

• The name of the creditor
• The amount you are supposed to pay each month
• The interest rate on the debt
• The debts outstanding balance
• Is the debt secured or unsecured

Not all debts are equal. Some debts are more important that others because the consequences of falling behind on those obligations are more severe. For example, if you don't keep up with secured debt, the creditors may take back their collateral i.e. the assets you use to guarantee payment. Therefore it is important to negotiate high priority debts first, such as:

• Your bond
• Your past-due rent
• Your car loan
• Your utility bills
• Your court-ordered child support obligation
• Your past-due taxes
• You student loan

When negotiating your lower priority debts which will be unsecured debt such as credit card debt, we will start by negotiating the one with the highest interest rate - because the debt is costing you the most each month.

When one of your creditors agrees to let you settle a debt for less, ask the creditor to report the debt as current and to remove all negative information related to the debt from your credit report. The creditor may or may not comply with your requests, but you won't know unless you ask.

Some creditors may want to review your financial information before they agree to negotiate with you or make any changes. This is why it is essential that we gather as much of your information as possible.

This is the information you will need to gather:

• Your household budget
• The list of all your debt
• A list of your assets and their approximate values
• Copies of your loan agreements

A creditor may make having a co-signer a condition of any new agreement. We suggest that you determine ahead of time if a friend or relative would be willing to co-sign for you. This means that if you default on your obligations your co-signer will be liable for payment, so be fair make sure that your prospective co-signer knows all the risks involved and it able to live up to the terms of the agreement.

Once we have come to an agreement with one of your creditors we will obviously make it official and put everything in writing.

The agreement will include:

• It's duration
• All deadlines.
• All payment amounts.
• Applicable interest rates.
• The amount of any fees you have agreed to and under what circumstance you must pay each fee.
• Everything the creditor has agreed to do or not do. For example, the creditor may agree to waive certain fees, forgive a past-due amount, or not report to the credit bureaus that your account is delinquent.
• When you and the creditor will be considered in default of the agreement and the consequences of the default.

Consolidating Your Debts

Debt consolidation is another option for managing your debts when you owe too much to creditors. It involves using new debt to pay off existing debt. When done correctly, it can help you get out of debt faster and pay less interest on your debts.

Knowing When Debt Consolidation Makes Sense

The following criteria need to apply if debt consolidation is the right option for you:

• The interest rate on the new debt is lower than the rates on the debts you consolidate.
• You lower the total amount of money you have to pay on your debts each month.
• You don't trade fixed-rate debt for variable-rate debt. The risk you take with a variable rate is that the rate could start out low but could move up.
• You pay off the new debt as quickly as you can. Ideally you apply all the money you save by consolidating to paying off the new debt.
• You commit to not taking on any additional debt until you pay off the debt you consolidated. It is very important to manage your money properly otherwise you could land up in even more debt.

DebtBusters offer a range of debt solutions and are designed to meet the individual's specific needs. For more info go to our Debt Solutions Page.

Dealing with Debt Collectors

Debt Collector... just the name is enough to intimidate most people. They are infamous for their aggressive and violent techniques. The words that comes to mind when thinking of employees. If you have ever dealt with a debt collector or know of someone who has, you will know that they will harass and threaten you will kinds of consequences, like jail time, in order to get you to pay.

Well you are not alone, in this section we will arm you with all the information and tools you will need when dealing with these intimidating characters.

Understanding How Debt Collectors Operate

When you fall behind on your payment obligations, you will receive a series of serious sounding notices demanding payment. If you don't pay the creditor is likely to contact a debt collection agency. When this happens it won't be long before you are contacted by a debt collector that works for this agency.

First Impressions

Some debt collectors are difficult and demanding right from the start. Others may start out acting relatively friendly on the phone but if you don't agree to pay immediately, they will turn up the pressure next time they phone.

Some debt collectors have the deliberate strategy of starting out being really friendly in order to encourage you to let your guard down and say something that will help them collect from you. Other debt collectors are paid according to the number of collection calls they place or number of demand letters they send out, another method that offers them a financial incentive is being pushy and persistent or worse. Others don't work for creditors at all, but the buy creditors old debt, often at a discount. Then the debt collectors try to make a profit by collecting as much as possible as quickly as possible.

Debt Collectors also know that statistically, the longer a debt goes unpaid, the less likely it is that they will ever collect it. This knowledge motivates them to start out strong and also encourages them to create a false sense of urgency when they talk to you. For example they may pressure you to commit to paying your debt by a specific deadline or according to a very short timetable.

If you don't agree to their demands, they may try to scare you paying by threatening you with a lawsuit, the loss of your personal property, garnishment or seizing of all your income, even jail time - regardless of whether these consequences are likely to happen or are even legal.

What Debt Collectors Can't Do

Knowledge is power, especially when dealing with debt collectors. Knowing how they operate and what the can and can't do to collect a debt from you should make it easier to deal with them and help protect you from their bullying and threats.

Debt Collectors Can't:

• Call you before 8am or after 9pm, unless you tell them it is okay to do so. Also they can't contact you at any time you specify to be inconvenient.
• Call you on a Sunday.
• Contact you at work if the debt collector knows that your employer doesn't want you to be contacted during work hours.
• Get in touch with your employer about the debt you owe, unless that debt is past-due child maintenance.
• Contact relatives, friends or neighbours to embarrass you into paying your debt. They can however contact them to find out how to get in touch with you but are not permitted to say why they need the information.
• Communicate with you about your debt by using a post card or an envelope that clearly indicates that a debt collector sent it.
• Call you over and over again during a relatively short period of time. For example calling you repeatedly during a single morning or afternoon.
• Swear or insult you when you are having a conversation with them.
• Order you to accept calls from them.
• Deposit a post-dated check you have given them before the date on the check.
• Collect more than you owe on a debt unless the contract the debt collector signed with the creditor states that they can.

What Debt Collectors Can Do

Some debt collectors harass and threaten people with dire consequences to get them to pay their debts. But in reality, if a debt collector is trying to collect an unsecured debt (one not collateralised with an asset), such as credit card debt, medical bill, or small personal loan, he is quite limited in terms of the legal actions he can take to collect from you.

If the debt is secured, the story is quite different. A secured debt is collateralised with an asset that you own, like your bond and your car loan, you could lose that asset if you do not take care of that debt.

If the amount of your debt is relatively small, the debt collector is likely to give up trying to collect it if you don't agree to pay what you owe right away. Most debt collectors are paid based on the amount of money they collect. When it becomes apparent that collecting from you is going to take time and effort, they are likely to move on to greener pastures. However you don't get off scot free:

The fact that the debt was sent to collections and remains unpaid will further damage your credit history and credit score.

Debt collectors will go to considerable lengths to collect large debts. In fact, they might sue you in order to try collect the money you owe. If a debt collector sues you, you will be notified of the lawsuit via a summons, which will tell you why you are being sued, for how much and what date you must appear in court.

Get in touch with an attorney as soon as you receive a summons. DebtBusters has its own in-house legal department that can guide and assist you through this process.

Should the debt collector win the lawsuit, the judge awards him a certain amount of money. However the debt collector cannot collect the money from you right away. Instead, he must get the court's permission to take specific actions in order to try to collect from you. For example, the debt collector can ask the court for permission to:

• Garnish your salary. If the court gives the debt collector permission to garnish your salary, it will issue an order requiring your employer to with hold a certain amount of your salary from each pay check for a certain amount of time.
• Take one or more of your assets. If a debt collector gets permission to take an asset that you own, the asset is sold in a public auction and the proceeds are applied to your debt.
• Put a judgment lien on one of your assets. When a lien is placed on one of your assets, you cannot sell or borrow against it without paying the debt collector the money you woe so the lien can be removed.

Managing Your Past-Due Bond

No matter where you live, whether it's a modest little cottage or an elaborate mansion, losing it in a foreclosure easily ranks as one of life's worst experiences - financially and emotionally. Financially you lose what is probably your biggest asset not to mention all the money you put into it. You may also forfeit any equity you have built up in your home (the difference between what your house is actually worth and the balance left on your bond.) Also, aside from filing for bankruptcy, nothing damages your credit history more than a foreclosure.

Emotionally, losing your home means losing a fundamental piece of your life and an important measure of success. A foreclosure may make you feel like a failure - your self esteem may take a big hit. You may also feel embarrassed because the foreclosure will be in the public records and may even be listed in your local newspaper. And if you lose your home, your friends and neighbours will want to know why you're moving. Foreclosure will also disrupt your family's life, your kids and your relationships.

Enough about the bad, here is the good news: You can avoid foreclosure if you tackle your mortgage issues head on and know your options.

Keeping Foreclosure at Bay

As soon as you know you're going to have problems keeping up your mortgage or as soon as you've missed a payment get in touch with your lender to discuss your options.

If you've already missed a payment or two, read each and every notice you receive about your mortgage. The notices will inform you of your rights, alert you to important deadlines associated with your past-due mortgage, and provide you with opportunities to try to resolve your mortgage arrearage. Also, if you receive a voice mail message regarding your mortgage, return the call right away.

Don't assume that if you don't pick up a certified letter related to your past due mortgage that the foreclosure process won't move forward, it will.

Take Immediate Steps

If your finances are not in particularly bad shape, you may be able to resolve your mortgage situation by taking the following steps:

• Develop a realistic household budget and stick to it.
• Review your existing budget for expenses you can reduce or eliminate.
• Negotiate reduced payments with your other creditors and put the money you save toward your mortgage.
• Lower your monthly debt payments by consolidating your debts.

Keeping On Track

Having your car repossessed can be disastrous. Most of us need a car to go to work, and using public transportation is not always a realistic alternative. Living without a car makes everything more difficult, never mind that repossession adds to the negative information in your credit history.

Running Through a Repossession

If you fall behind on your car payments, you are playing with fire. The company that financed the purchase of your vehicle is legally entitled to take it back without getting the court's permission first.

Knowing the Law

For specific information regarding when your car can be taken, exactly how the repossession process works, and your repossession rights, do the following:

• Find out about the law by contacting a consumer law attorney, research on the net or contacting your municipality.
• Review the details of your car loan agreement.

Your loan agreement may give you the right to avoid repossession by curing the default.

Having Your Car Auctioned Off

After your vehicle is repossessed, the lender stores it and arranges to sell it in a public auction.

When your vehicle is sold, the lender applies the sale proceeds to your outstanding car loan balance. If the proceeds don't cover everything, the lender is legally entitled to ask you to make up the difference.

Although your lender is legally obligated to sell your vehicle for a "commercially responsible price" don't count on the vehicle selling enough to cover the deficit. That rarely happens in a public auction.

Paying the Deficiency

If you can't afford to pay the full amount of the deficiency in a lump sum, ask the lender if you can pay it off in instalments over a period of time.

If you and the lender do come to an agreement about paying the deficiency, do not begin making payments until you have everything in writing. If the lender won't prepare an agreement, write one yourself and send the lender a copy after you have signed and dated the original.

Anticipating What Happens if You Can't Pay the Deficiency

If the lender refuses to let you pay the deficiency through an instalment plan and insists you pay in a lump sum - don't give in to their demands if by doing so you jeopardise your ability to keep up with your priority debts and/or your most important living expenses.

By not giving in, you leave the lender with three options. The lender can:

• Turn your deficiency over to a debt collector.
• Sue you for the right to collect the deficiency. If the lender wins the lawsuit, it may ask the court for permission to do one of several things.
• Put a lien on one of your assets so you can't borrow against it or sell it until you pay the deficiency.
• Seize one of your assets, sell it and apply the proceeds to your debt.
• Garnish your wages - the lender receives a portion of your wages for a limited period of time.

Write off the deficiency and report it as uncollectible to the credit bureaus it works with.

Getting Your Vehicle Back

After your vehicle is taken and before it is auctioned off, you have two options to try get your vehicle back.

• Buy it back from the lender. Buying it back may make financial sense if your vehicle is worth more than the outstanding balance on your loan.
• Reinstate your car loan. Reinstating your loan means you agree to resume paying on it according to the original agreement.
• Before you do anything, talk with a consumer law attorney. At DebtBusters we have an in-house legal department, and u make sure to check it with your budget and your DebtBusters consultant.

Avoiding Repossession in the First Place

Repossession may not be inevitable, assuming you act quickly enough. You can take steps to avoid it, including negotiating with your lender, selling your vehicle, and filing for bankruptcy.

Negotiating a Way to Keep Your Car

If your credit history is in relatively good condition and you haven't yet missed a car loan payment, but you are worried about keeping up with those payments. You may want to approach your lender about extending the term of your loan (its duration) in order to lower your monthly payments. If the lender agrees, you will pay more in interest over the life of the loan, but that trade-off may help you keep your vehicle. If the lender agrees, you will pay more interest over the life span of the loan, but that trade-off may help you keep your vehicle. At DebtBusters we negotiate with your lenders on your behalf.

Selling Your Car

If you fear that you won't be able to keep up your car payments, you can try sell your car before you miss any loan payments and use the proceeds to pay off your car loan. Your goal is to sell it for more than your outstanding loan balance so you have some cash to buy a used vehicle - in the best case scenario.

Here's a more realistic situation: You probably owe more on your vehicle than what it's worth. Unless you can come up with the difference between what your car sells for and what you still owe on it, the lender won't give you title to the vehicle, which means you can't complete the sale.

Another option is to get someone to take over the payments on your car assuming your that your loan agreement allows it and the lender okays it. In this situation, the other person takes your car and starts making the loan payments.

The lender probably won't remove you from the loan paperwork, so even though you no longer have the car, you are still liable for the loan. If the person who takes over defaults on the loan, your credit history will also suffer. That's why it's very important to make sure you can trust the person who takes over your payments.

Selling Your Vehicle Fast and for a Good Price

You end up with more money in your pocket if you sell your car to an individual buyer rather than a used car dealer. Follow this advice to get your car sold quickly and for a good price:

• Price your car fairly. Research your car's national market value and look around at ads for similar cars for sale, to make sure you set a fair price on your car.
• Take care of your inexpensive repairs before you put your car on the market. Be prepared to share your repair and maintenance records with potential buyers so that they know you have taken good care of the car.
• Clean your car inside and out before you show it to prospective buyers.
• Let your friends and relatives know that you're selling your car, word of mouth advertising is definitely not overrated.
• Advertise in your local newspaper and/or on the Web, a good website to advertise for free is www.gumtree.co.za. You can post a free ad with the car details as well as a photo of the car.

Giving Your Car Back Voluntarily

When you and the lender can't come to an agreement on a way to keep your car, when selling it is not a viable option, you can just give it back to the lender. Doing so is called voluntary repossession. The main benefit is that you don't have to reimburse the lender for the costs of repossessing the car. However you may still have to pay the lender for the costs of storing and selling it.

After you give your car back, the process works pretty much as if you lost your car in repossession.

Avoiding an Eviction and the Loss of Your Utilities

When you are struggling to make ends meet and you fall behind on your rent, the worst thing that can happen is you receive and eviction notice. Suddenly your bad dream turns into a fully fledged nightmare.

At DebtBusters we know that facing eviction is extremely tough, especially if you have a family and children to consider. We will shed some light on the alternatives to avoid eviction and also explain how eviction works in case of the worst case scenario, as well as how to make sure you keep your utilities running.

Keeping a Roof over your Head

You probably signed a lease with your landlord before you moved in. The lease is a contract that spells out the obligations you have to your landlord and vice versa. It indicates the start and end of the lease agreement and the amount of rent you must pay each month; the amount of money you must put up as a security deposit; and all the other terms and conditions of your lease; including when you can be evicted.

Don't assume because you have a good relationship with your landlord or that you have a good history of paying you rent on time that your landlord won't evict you. If you miss even one payment, your landlord could make a purely business based decision and evict you.

Keep in mind that an eviction makes it harder for you to rent again. Your new landlord will run a credit check as part of the application process, and your current landlord would have probably reported your late payments and eviction to the national credit bureaus.

For these reasons and others, you want to avoid eviction at all costs. Evaluate your options for dealing with your rent as soon as you realise that you can't keep up with it. Act quickly to pursue whichever option you think is best. Your options may include:

• Paying your past due rent immediately
• Negotiating with your landlord
• Terminating your lease
• Breaking your lease
• Subleasing your home or finding someone to assume your lease
• Getting a roommate

Paying your Past-due Rent

Getting caught up on your past-due rent is the most obvious way to avoid being evicted but may be easier said than done.

If you know your finances are about to take a positive turn you may want to consider lending money from a friend or family member, knowing that you can pay them back as soon as you come right financially.

Negotiating a Way to Stay

Maybe you truly believe that your money problems will be short lived. You've looked at your budget and your financial prospects, and you know things will improve in a few months. If you are certain that you won't have any problems in paying your rent after your problems are over, talk with your landlord about making reduced rent payments for a while.

Your landlord may agree if you can convince him/her that your financial prognosis is good and if you've had good payment history up until now. However if you've been a problem tenant - having noisy parties, paying your rent late etc. Don't hold your breath.

You may also have more of a difficult time negotiating a way to remain in your home if your landlord is a big bureaucratic company rather than an individual who maintains a direct relationship with his/her tenants.

If your landlord is willing to let you make smaller rent payments for a limited period of time, get the terms of your agreement in writing.

Be sure the agreement addresses all the following:

• The amount of reduced payments.
• The duration of reduced payments.
• When you will be in default of the agreement.
• The consequences of a default.
• How and when you must pay any rent that is already past due. Your landlord may agree to take the money out of your deposit, but if your deposit won't cover it all, you need to agree how you'll make up the balance. Many landlords prefer to reserve security deposits to pay for cleaning and repairing and apartment after a tenant moves out, so your landlord may expect you to pay your past due rent in full.
• How you'll make up the difference between your normal monthly rent and what you will be paying. Your landlord may want you to pay the difference in a lump sum by a certain date, or he may expect you to pay a little extra each month after you resume your regular monthly rental payments. Some (but not many) landlords will agree to deduct the difference from your security deposit and then look to you to make up whatever money you may still owe.
• Whether you must pay an extra security deposit.

Terminating Your Lease

If your lease in month to month (unlike most leases), you can end it at any time for any reason, as long as you do so according to the terms of the lease. After the lease is legally terminated, your landlord cannot hold you responsible for any future rent payments.

Most month-to-month leases require that you give your landlord at least 30 days written notice of your termination plans. However, if you rented me with a longer lease that has become a month-to-month lease, be sure you look at the lease agreement. Some landlords require 60 days notice given at the end of the month. So if you give notice at the beginning of a month, it could be three months before you can legally move out without breaking the terms of the lease.

After you give notice, your landlord is entitled to any back rent or late fees you owe, and to be reimbursed for any damage you have done to your home. Your landlord deducts the fees and expenses from your security deposit and is required to send you any money left from the deposit within the time period specified in your lease. (If you break your lease don't expect to get your deposit back.) If the security deposit does not cover everything you owe, your lease probably entitles your landlord to ask you for the difference. If you do not pay it, your landlord may sue you.

Breaking your Lease

Sometimes, breaking your lease can be a good way to avoid an eviction. When you break your lease, you move out before the term of the lease is up and before the landlord files an eviction suit.

If your lease is almost up, and depending on its terms it may cost you less to finish out the lease than to break it. (This assumes that you can come up with the money to stay there until the lease ends.)

Before you break your lease, read it carefully to see if it spells out a specific break-your-lease process and the consequences of not following that process. Among other things, your lease may require you to give your landlord a certain amount of advance notice about your plans, and it may obligate you to continue paying rent until your landlord finds someone to replace you as a tenant.

Your lease may also give your landlord the right to be reimbursed for the expenses he incurs trying to find a new tenant: the cost of a newspaper ad, for example. However in many leases, reletting fees are a set amount.

Breaking your lease won't release you from your obligation to pay your landlord any past-due rent you owe before you move out. Unless you pay that debt, your landlord deducts it from your security deposit together with any late fees and other expenses you owe. If your security deposit is not large enough to cover everything, you must pay the balance (unless your landlord decides to waive it.)

Renting your Home to Someone Else

Subleasing your home may be another way to avoid an eviction, depending on the terms of your lease. When you sub lease to someone, that person (the sub lessee) moves into your home and pays the rent according to your lease agreement. However because the lease remains in effect until its term is up, if the sub lessee stops paying the rent, your landlord can hold you liable for the missed payments. Also the landlord can hold you responsible for any other violations to your lease, such as damages to the home.

Before you begin the sub lease process, read your lease to confirm that it allows sub leasing and if it does, whether you must comply with any special requirements or conditions. For example, most leases require tenants to get upfront approval from their landlords before they sublet their homes.

If your lease doesn't allow you to sublease, your landlord may allow it anyway. Especially if he/she can see that it will be the best way to receive their rent.

Putting a Sublease in Writing

When you find someone to sublease to, prepare a written agreement. At minimum it should state the following:

• The amount of rent the sub lessee must pay each month and the rent due date
• The amount of any security deposit your landlord my require from the sub lessee
• All other lease obligations of the sub lessee
• The duration of the sub lessee agreement
• The process that the sub lessee must follow if he/she wants to stop subleasing before your agreement is up
• The consequences of breaking the agreement

Considering Similar Options

Your lease may allow you to let someone assume it, which is a better alternative than subleasing because the person who assumes your lease becomes legally liable for it. In other words, give up all your interest in the lease. If the person who assumes your lease breaks the lease, your former landlord y hold you responsible for any money owed. Make sure that you are formally released from the lease when the other person assumes it.

Another alternative is for your landlord to give the new renter a totally new lease and allow you to terminate your own lease without having to pay any penalties.

Sharing your Space

Finding a roommate to split the cost of your rent and utilities may be the perfect answer to your problem. Before you let someone move in with you, be sure that your lease allows you to have a roommate. If it does, be clear about any rights the landlord may have, such as the right to approve a roommate before he/she moves in. If you violate the terms of your lease, you may face eviction.

Discussing the Business of Living Together

After you find a roommate, discuss how the two of you will manage the practical aspects of living together. For example:

• How will the rent get paid each month? Will you each write a check for one half of the rent, or will one of you write a check for the full amount and get reimbursed by the other.
• Who will pay any additional security deposit your landlord may require?
• How will you share joint expenses such as utilities, DSTV, Internet etc?
• How much notice must your roommate give you if he/she decides to move out before your lease is up, and what are the financial implications of him/her doing so.
• Under what circumstances can you ask your roommate to move out if you decide that living together isn't working out.
• Is your roommate obligated to help you find an acceptable new roommate if he/she moves out before your lease is up?
• How will you share the housework?
• If you are going to share a home, how will you divvy up any chores your landlord doesn't handle, such as mowing the grass etc.

Facing Eviction

You've tried everything you can think of to avoid being evicted, but the writing is on the wall. Now it is time to prepare yourself with all the information on how evictions work.

** Begin planning now for how you'll come up with the money to pay a new security deposit. Being evicted means that you won't get your deposit back from your landlord, and your new landlord may require a substantially larger deposit due to your rental history.

Receiving a Warning

Before an eviction can begin, your landlord sends you either a notice to pay or vacate or a notice to vacate. If you receive the first type of notice, your landlord is giving you an opportunity to avoid an eviction by paying what you owe. If you receive the second type of notice, your landlord is telling he simply wants you out. The first notice will indicate the date by which you and all your belongings must be out if you can't come up with the money. The second notice tells you when you must be out.

Paying what you Owe

Obviously, a good response to imminent eviction is to pay your landlord what you owe by the due date. Not only do you avoid being evicted, but you also buy yourself time to either move out or pursue another one of your options.

Moving out by the Vacate Date

Moving out won't let you off the hook for your past-due rent or for any fees your landlord may be entitled to collect, such as late fees and bounced check fees. In addition, you lose your security deposit.

If your security deposit is not large enough to cover everything you owe, your landlord may be entitled to ask you to make up the difference. If so, talk to your landlord about whether you can pay the difference in instalments. If not, unless you can figure out a way to come up with the money, your landlord may turn your debt over to a debt collector or even sue you for it, especially if the amount you owe is substantial.

Disputing the Amount Your Landlord Says you Owe

If you disagree with the amount of money that the warning notice says you must pay in order to avoid being evicted, talk to your landlord and write a letter stating how much you think you really owe. Attach the letter to any other documentation that will back up your argument. Make a copy for your personal files and send your landlord the letter via certified mail. Request a return receipt so you know when he/she has received the letter.

Getting a Summons from the Court

If the eviction process moves forward, your landlord files a complaint with your local small claims court. The complaint will state why he/she thinks you should be evicted.

After the complaint is filed, an eviction hearing is scheduled. The court sends you a summons (which is usually served by a constable) officially notifying you that your eviction has begun.

If you are not already in contact with an attorney, don't delays get in touch with one immediately. At DebtBusters we have our own in-house legal department that can assist you.

Depending on the facts of the situation, the attorney may advise you to do one of the following:

• Fight the eviction. Tell the judge why you should not have to move out or why your landlord should give you more time to catch up on your rent. The judge may sympathise with your situation and ask your landlord to try work something out so you can stay put or at least give you enough time to find something else to rent.
• Settle with your landlord. Your landlord may agree to drop his lawsuit if you agree to do certain things by a set date, such as pay all the past-due rent that you owe and move out. Get the terms and conditions of any agreement in writing.
• Do nothing. If you do not respond to the court summons and you don't show up in court on the trial date, the court will probably award your landlord a default judgement against you. That means that the landlord gets the right to make you move out by the date set by the judge.

Being removed from your home

If your landlord wins the lawsuit, you will probably receive a court notice telling you the date by which you must be out of your home. The deadline probably won't be very long after the judge issues his decision.

If you don't have a place to move out to yet, find one immediately. In the meantime, ask your attorney whether he/she thinks you have any chance of getting the eviction delayed or cancelled.

If the eviction moves forward and your belongings are still in the home on the date you are supposed to be gone, a local constable or sheriff of the court will come to your home, ask you to leave and put your belongings into storage.

When your belongings are in storage, you have to contact the moving and storage company and make arrangements to reimburse it for its moving and storage costs. Do so quickly: After about 30 days, the storage company will begin selling your things.

Handling Medical Bills and Child Support Obligations

Both of these types of debt are difficult because of the potential legal and financial consequences of not paying as well as the emotional stress and upheaval created in your life in comparison to other debts.

If you are struggling to pay these debts, you won't find any easy answers but we will be able to give you an overview of your options as well as the processes behind each debt.

Appreciating the Risks of Not Paying Your Medical Bills

Even if you have medical aid, a brief stay in hospital or an illness or accident that requires outpatient tests and extended treatment can leave you with a mountain of medical debt to pay. If you have no health coverage, your medical bills can far exceed what you can ever afford to pay. In fact, medical debt has become one of the leading causes of consumer bankruptcy.

Making matters worse, a growing number of doctors and hospitals responding to their own economic pressures by getting tough on patients who don't/can't pay their medical bills. You might even find that a doctor or hospital is willing to get quite aggressive about collecting from you. The medical provider may:

• Turn your past-due account over to a debt collector. If the medical provider turns your account over to a debt collector, that fact will almost certainly end up on your credit history. It will lower your credit score, even if the debt is relatively small.
• Sue you for the money you owe. By doing so, the medical provider can get a court's permission to put liens on your property, freeze your bank accounts, seize your assets and/or garnish your wages.
• Refuse to treat you (or your family member). The provider may take this step even if you or your family member has ongoing medical problems. Some medical providers insist on cash up front in order to obtain additional medical care. In area where there are few alternative providers this could prove to be a huge problem.

Taking Action to Reduce Your Medical Debt

If your medical bills are piling up and you are worried about how to pay them, an option you have to try reduce them as much as possible.

• Be sure that the bills are accurate. When you find errors, get them corrected and get your bills adjusted.
• Make your insurance company pay for everything it should. If your bills are the result of an accident that someone else caused, get that person's insurance company to pay as many of the bills as possible.
• Pursue all medical discounts you are eligible for.

Reviewing Bills with a Fine Tooth Comb

Too many people put doctors and hospitals on a pedestal. They assume that medical bills are always correct or are afraid to speak up if they find errors. Medical Professionals are human beings just like you and me, they can make billing mistakes!

Usually the mistakes are innocent - information gets keyed in incorrectly. But even innocent errors can be costly. And some billing errors are deliberate. For example the doctor may use one code to describe the treatment he provided to you but use a different code to charge more for his services. Or a doctor may purposely charge you for a procedure you never received, or bill for more hours of operating time than were actually required.

Studies show that the incidence of hospital fraud is rising. Protect yourself by reviewing every medical bill you receive line by line. Look for overcharges, double billings and charges for care and services you didn't get.

You may be thinking that reviewing your medicals is a task easier said than done - they are full of codes and numbers that mean nothing to you and me. If you can't make heads or tails of your medical bills, call the medical providers billing office. Start asking questions, and don't be afraid to ask more questions if you don't understand an explanation or if something doesn't seem quite right.

Making your Medical Aid Pay

If you have medical aid and they refuse to pay one of your medical claims or does not pay as much as you think it should, read your policy to see if you can find the reason for the company's decision. If you can't find a good enough reason, contact the company's customer service department. You can also send a letter appealing the decision. Your last resort is to contact a consumer law attorney to take the matter further, just make sure you have a strong case.

Pursuing Other Options for Reducing Your Debt

Depending on your income and the total value of your assets, u owe you may have other options for reducing the amount you owe to medical providers:

• If your medical bills are the result of a car accident that was not your fault, make sure that the insurance company of the other driver pays as much as possible on the bills.
• Some hospitals will let you whittle down your debt by doing volunteer work. If this option interests you, speak to a hospital advisor.

Tackling Your Remaining Debt

When you know exactly how much you owe on your medical bills, you have a few options for paying the debt (assuming you don't have the cash to pay it in full):

• Ask the medical provider to set up an instalment plan. Most providers will let you pay this way, assuming you don't owe that much that it will take years to pay. Make sure to check your budget and sort out a way to fit these instalments into your monthly plan.

Get clear about the terms and conditions of the instalment plan before you agree to it. For example:

• Will you be charged interest? If so, what will the interest rate be?
• Are there any fees associated with the agreement?
• When will you be considered in default of the agreement, and what will happen if you are?

Some doctors and hospitals will not provide additional care to patients who have outstanding debt, sometimes even when they're paying off that debt through an instalment plan.

You can also consider paying your medical bills with a credit card or get a bank loan, but if you are already in debt we don't suggest taking more credit.

Your final option, if none of the others work, may be to file for bankruptcy is probably the best move. Depending on your overall financial situation, you may be able to get rid of the debt completely by filing for liquidation.

Prioritizing Paying Child Support

Child support is most often an issue when you are divorced and have minor children from your previous marriage. Depending on your the terms of your divorce agreement, a court order may be in place requiring you to pay your ex spouse a sum of money each month for a set amount of time. The court order may also require that you provide your kids with medical aid, help pay for their university educations and so on.

If you have minor children from a non-married relationship, you can also owe child support if the other parent obtains a child support court order.

Even if you are going through financially trying times, you have a moral (as well as a legal) obligation to help take care of your kids by paying your court ordered child support every month. Making those payments should be your top priority every single month. Your kids should not have to pay for your money troubles, nor should the other parent have to sacrifice or work harder to make up for your lack of support.

Knowing the Consequences of Not Paying

You face serious consequences if you don't keep up with your child support obligation and the other parent takes steps to get the child support court order enforced. Here are some possibilities:

• The state that ordered you to pay child support will come after you for the money.
• A child support debt collection agency may try to collect from you.
• The other parent may hire an attorney to collect from you.
• A family law judge may put you in jail until you pay your past-due child support.

Starting a new family has no effect on your financial obligations to the minor children you already have. You must carry on providing for them with support according to the terms of your court ordered child support . The court will not modify the court order just because you have more kids.

If you fall behind in your child support obligation, eventually, a government office, a private collection agency, or an attorney may contact you.

Being Pursued by a Child Support Collection Agency

The other parent involved may hire a private child support collection agency to collect the money you owe.

Initially, most private child support collection agencies will contact you directly to discuss how you intend to get caught up on what you owe. If you cannot pay your debt in full, the agency that contacts you tries to get you to agree to an instalment payment plan. If you can't afford one or you aren't able to agree on the terms of a plan, the agency may ask the court for permission to do one of the following:

• Have your wages garnished.
• Place liens on some of your assets.
• Enforce a lien that may already be in place as part of your divorce agreement.
• Freeze assets, such as the money in your retirement plan, any settlements you have received from an insurance company, or an inheritance. When these assets are frozen, you cannot sell, borrow against, or transfer them without clearing up your child support debt first.

If you are contacted by a child support collection agency and can't afford to pay your debt in a lump sum or through an instalment plan, discuss your options with a bankruptcy attorney.

Hearing from an Attorney

Another way the other parent of your minor children may try to collect the past due child support money is by hiring a family law attorney.

The attorney can take all the same steps that a private debt collection agency can to collect what you owe. These steps include putting a lien on your assets, enforcing an existing lien, taking a portion of your salary every month, seizing some of your assets, freezing some of your assets.

If you hear from an attorney about your past due child support obligation, get in touch with a family law or bankruptcy attorney right away.

Keeping Up with Your Obligation

When money is tight and you wonder if you can keep up with your child support payments, you must do everything you can to make them. Your kids' quality of life is at stake and you may face serious consequences if you fall behind.

Making Tough Choices

To avoid missing child support payments, here are a few steps you can take:

• Review your budget each and every spending reduction you can possibly make. If you don't have a budget, it's time to prepare one.
• Consider getting another job or doing freelance work. Use the additional income to pay your child support.
• Contact your creditor to lower your monthly payments. At DebtBusters we negotiate with your creditors on your behalf.
• Consolidate your debts to reduce the amount you have to pay your creditors each month.
• If you believe that your financial problem are temporary, borrow the money you need to meet your child support obligations.
• Sell assets. Are you still driving a luxury car? Do you own a boat or motorcycle? Sell what you can, and use the sale money to take care of your kids.
• If you can't keep up with your child support payments and your mortgage or rent payments too, you may even need to consider selling your home. You can buy a less expensive place to live or find a place to rent.
• Ask the court that issued the child support court order to modify the order on a temporary or permanent basis. If the court agrees, you still responsible for paying any child support you may have already missed.
• File for bankruptcy. You can't use bankruptcy to wipe out past-due child support debt but you can use it to get rid of other debt preventing you from paying your child support.

The longer you delay on paying your past-due child support, the harder it will be to catch up and the more severe the consequences will become.

Asking the Court for a Modification

You can ask the court to lower how much you have to pay in child support each month if your financial circumstances have changed dramatically since the court order was written. For example:

• You lost your job and have not found a new one.
• After months of looking you have found a new job, but it pays far less than what you used to earn.
• You're unable to work because of a serious illness or accident.

Depending on your situation, the court may agree to modify your child support payment court order on a temporary or permanent basis. But you must have exhausted all your options before they will consider doing so.

If the judge decides to modify your payments on a temporary basis, the court will decide how long the modification will last and how much you pay while the modification is in effect. The judge might ask you to make up the difference by paying more than your original court order stated for a period of time when your modification ends. Or the judge may ask you to give the other parent an asset to make up the difference.

You will increase your chances at getting a modification if the other parent of the child/ren accepts the terms of the modification.

Getting Good Credit Back

When problems with debt have ruined your credit history, it's a good idea to start the rebuilding process as soon as possible. Eventually the amount of positive information on your credit record increases you become attractive to creditors again.

New credit? Why on earth would we want you to owe money to creditors again? We'll tell you why...

The first reason is that debt is not necessarily a bad thing. What distinguishes good debt from bad debt is the amount that you owe and the kind of debt it is. Debt can actually be a positive force in your life and a valuable money management tool.

The second reason is that having a credit history full of negative information limits your opportunities and makes it difficult to achieve your financial goals.

• Insurance companies may not be willing to sell you the life insurance that you feel you need and/or they might charge you more for your policies.
• A potential employer may be unwilling to give you a job.
• If you're a renter looking for a new place to live, some landlords will refuse to let to you.

Here is some basic information about the various types of credit so that in future, you're better prepared to make smart credit choices.

Separating Good Debt from Bad Debt

Not all debt is bad. Whether your debt is good or bad depends on the type of debt, the reason you owe it, and whether you can afford to repay it. When used the right way, debt can help you manage your finances more effectively, leverage your wealth, buy things you need and handle emergencies. But if you're not careful, debt can wreak havoc on your finances and destroy your dreams.

Debt can be a positive force in your life when it helps you:

• Build your family's net worth - the difference between the current value of your assets and the amount of debt you owe. A mortgage is a perfect example. Good debt is even better debt when the value of the asset you finance increases over time.
• Buy something that will save your family money for years to come. For example a loan to dig a borehole at your home or install solar heating - saving on your utility bills for months to come.
• Purchase something important to your life that you could never afford to buy if you had to pay with cash. For example a car loan or a mortgage.
• Invest in yourself in order to increase your earning potential. For example returning to college or to upgrade your skills so that you can make more money in your current field of work or move into a more lucrative career. Student loans are a common example of its kind of debt.
• Pay for an unexpected emergency when you don't have the cash to cover it. For example, your car breaks down, your child gets sick and needs urgent, expensive medical attention.

Debt can be a negative force in your life when:

• You go into debt to buy nonessential goods or services that do not increase your wealth and have no lasting value. Examples include restaurant meals, groceries, clothing, personal items and holidays. The longer you take to repay the debt and the higher the interest rate on the debt, the worse the debt. Credit card debt is the most common type of this kind of debt.
• Credit card debt is not bad if you pay it in full as soon as you receive your statement, or if you pay the debt in full within a few months and you don't spend more on the card until you've paid off the outstanding balance on your account.
• Secure the debt with your home or with another asset you don't want to lose when you're not sure that you can afford to repay the debt.
• Have a high interest rate and make low monthly payments. By the time you pay off the debt, the amount you pay in interest exceeds the value of the product or service you financed.
• Borrow money from dangerous lender such as loan sharks.

Distinguishing Between Different Types of Credit

The word credit refers to a wide variety of products, each with its own characteristics. To use credit wisely, you need to understand the difference between each type:

Defining Secured and Unsecured Credit

All credit is either secured or unsecured. Usually the more money you want to borrow and/or the worse your credit history is, the more likely it is that you'll qualify only for secured credit.

When your credit is secured, the creditor has a lien on one of your assets, which means that it can take an asset if you don't repay your debt according to the terms of the credit agreement. The asset with the lien on it is referred to as your collateral.

Here are common examples of secured debts:

• Mortgage: The home you are financing usually secures this kind of loan.
• Car loan: The car itself is the loan collateral.
• Home equity loan: Your home secures this kind of debt.
• Secured credit card: The money in your savings account or a certificate of deposit collaterises your secured credit card.
• Line of credit: Depending on the specific type of credit line, it may be secured by your home, the funds in your bank account, a certificate of deposit, or some other asset you own.

Unsecured credit works quite differently. When a creditor gives you this kind of credit, it simply accepts your word that you repay your debt according to the terms of your agreement with one another. You give your word by simply signing on the dotted line. If you go back on your word and default on the agreement with the creditor, or ignore the calls of a collection agency acting on behalf of the creditor, they may sue you to get their money back.

Following are examples of unsecured debts:

• Some bank loans: Unsecured bank loans are called signature loans.
• Most MasterCard and Visa Cards: When you are approved for this type of credit, you agree to pay at least a minimum amount each month on your card balance.
• Retail store and petrol cards: You must repay these cards by paying at least the minimum due each month.

Looking At Credit another Way

Another way to look at credit is according to whether it's instalment, open-end; instalment , closed-ended; or non-instalment credit.

• Instalment open-end credit: Most credit cards fall into this category. You are given a fixed amount of credit - your credit limit - that you can use however you want and whenever you want. When you use the credit, you must pay at least a minimum amount each month, an
• Instalment, close-end credit: You are given a fixed amount of credit to be used for a specific purpose. For example buying a couch from a furniture shop who finances it for you, you must pay a fixed amount every month to the retailer until you have paid it off. Other examples are car loans, student loans, mortgages.
• Non-instalment credit: This kind of credit often comes with a very high credit limit, but you must pay the full amount of the credit that you use when you receive your bill. An example is if your local grocery store lets you sign for groceries and expects you to pay the full amount you owe at the end of the month.

Seeing Yourself the Way Creditors See You

Whenever you apply for credit, reputable creditors evaluate your application according to three basic criteria: your character, capacity and collateral. They decide how you measure up against these three criteria by reviewing your credit history and checking out your credit score. They may also ask you to provide them with detailed information about your assets and your debts.

Here's how the three C's of credit work:

• Your character: To assess your character, creditors review your credit record information to find out if you've failed to pay your credit accounts on time, stopped paying your child support, been sued by any of your creditors, filed for bankruptcy, and so on. Although having this sort of information in your credit history does not necessarily mean that you're a bad person, it's definitely not helpful when you apply for credit.
• Your capacity: Creditors don't want to give you credit unless they believe that you can afford to repay it. To find out if you can and to determine how much credit to give you, creditors review your income, find out the amount of debt you already have, and perhaps evaluate your assets. They will also have a look at your credit history to see if you have applied for a lot of credit, if you have they may see you as a credit risk. This means that they might not give you any credit at all, less than what you've asked for or charge you a higher interest rate and may require you to secure an asset for the credit.
• Your collateral: If you apply for a lot of credit and your credit history is not great, creditors will look at your assets as your collateral to secure the credit. If you don't have any assets they will probably turn down your request for credit.

Rebuilding Your Credit History

So you're living on a budget, you've resolved all your debt problems, and/or you've completed your bankruptcy... it's time to start repairing your credit history.

The credit rebuilding process is not difficult but it takes time. Your goal is to add positive information to your credit history by obtaining a small amount of new credit from a reputable creditor, paying it off according to the terms of your credit agreement, obtaining additional credit and paying it off on time etc.

Laying the Groundwork for Credit Rebuilding

Before you begin the credit rebuilding process, you need to get some preliminaries out of the way. These preliminaries help you ensure that the process goes smoothly.

Order a copy of your credit history from NCR.

Common credit record errors include the following:

• Accounts that don't belong to you.
• Incorrect information about your accounts.
• Information about some of your accounts is incomplete.
• Old negative information that should not be reported.
• Old identifying information that is now incorrect.

Find out your FICO score: the higher your score the more attractive you are to credit providers.

Start saving: A savings account is the foundation of most credit rebuilding.

Using a Credit Card to Begin the Rebuilding Process

Use your credit card in one of two ways to rebuild your credit:

• Use your card to make small purchases each month, and then pay the card balance in full and on time.
• Use your card to buy something relatively expensive, and pay off the card balance over time. Always try to pay more than the minimum due each month, and avoid using your card for anything else until you've paid off your balances.

Getting a Loan: The Next Step in the Rebuilding Process

Applying for a bank loan and paying it back on time is the next step in the rebuilding process. Set up an appointment with your bank to discuss your borrowing needs. The bank where you have your current and savings account is a good place to start.

Be honest and upfront about your financial problems as they will find out anyway when they look at your credit history. Explain what you have done to improve your situation and avoid money troubles in the future. Let him know that you have begun the credit rebuilding process and, as part of the process, you would like a small bank loan.

Life after Too Much Debt: Staying on Track

An overview of what to remember to stay debt free and financially stable:

• Set financial goals and create a plan of how to get there.
• Build a financial safety net by saving.
• Live within a budget.
• Manage your credit by setting limits and paying back more than the minimum required.
• Research and become financially informed.
• Ask for help when and if you need it.
• Keep cash as your king as far as possible.