Establish a Debt Recovery Plan

Debt Recovery Plan #5 - Credit lines are maxed out. Many major bills are over 6 months late. You may have a judgement, lien or lawsuit filed against you. Your wages may be garnished. Your credit score has been impacted significantly.

For this debt recovery scenario your accumulation of debt is overwhelming, a significant financial mark has already been made on your credit score, and you need immediate debt relief assistance for even basic necessities. In order to recover, you will need to take immediate and drastic personal debt relief measures, as well as seek professional debt relief asssitance.

• Way of Life - Get organized, study your expenses, create a budget, track the progress of your debt relief plan every month.
• Way of Life - Cut the frill like buying coffee on the way to work, pack your own lunch and stop eating out in general.
• Way of Life - Cancel magazine subscriptions, memberships and other costs that you can live without.
• Way of Life - Reduce cell phone luxuries or limit them to need-only - separate the "want" from the "need". Stick with a basic phone plan that you and your family can live with.
• Way of Life - Don't cut out TV unless you must, but minimize the service plan, and similar for your internet connection.
• Way of Life - Rent movies or go to the dollar-theater, and skip the popcorn.
• Way of Life - Get the whole family on board. Conserver energy, water, gas, mow your own lawn, cancel maid services, pet grooming, tanning beds, manicures, hair salons, chiropractors, etc. If you can't give many of these luxuries up, then your situation will not improve.
• Way of Life - Stop shopping except for food and the bare essentials!
• Way of Life - Look at 2 months of bank statements to find ideas where you can find debt relief. Some of these changes will hopefully be permanent, but most importantly a debt relief plan will buy you the time you need to get back on top of your debt.
• Lowering Expenses - Check your credit score, and actively begin a credit repair process to remove inaccuracies. Better credit means better interest rates, which will help out with the suggestions described below.
• Lowering Expenses - Consider refinancing your home, but make absolute sure that it will help your bottom line.
• Lowering Expenses - Consolidate debt through a home equity loan or credit card balance transfers.
• Lowering Expenses - Consider refinancing your auto loans, or "trade down".
• Lowering Expenses - If you have tax debt, contact the IRS or State, and work out a debt relief payment plan.
• Lowering Expenses - Take a close look at your phone bills. If you have a FAST broadband internet service, consider replacing your traditional phone service with a service from Vonage or Magic Jack or equivalent.
• Lowering Expenses - Try living only on cash, a debit card or a pre-paid credit card. Stop using traditional credit card unless it means no food on the table. Unless it is an emergency, if you can't afford to buy it in cash, then don't buy it.
• Lowering Expenses - Stop making 401k payments or other investments and use those funds to pay off debt. Consider cashing in your investments or other liquid or semi-liquid assets. If your investment returns less than the interest rate on your credit cards, then paying your credit cards off is the better "investment." Just be sure that every dollar taken away from your 401k goes directly towards repaying debt.
• Lowering Expenses - If you rent, speak with your property owner for a potential temporary reduction in fees.
• Lowering Expenses - Sell big ticket items that are seldom used. If you have 3 cars, but you can survive with two, then sell a vehicle weighing fuel economy and monthly payments. If you have a boat, trailer, motor home, motorcycles or other items that are not used regularly, then consider selling them.
• Increase Income - Consider seeking a second job or volunteering for overtime, or have your children age 16+ seek employment. This does not have to be permanent, just until you get on top of your finances. This is NOT a good time to find "work from home" opportunities, which actually cost you more money to buy the kits, and are a big distraction.
• Increase Income - You may be attached to your job, and that is okay. But consider the option of finding a higher paying job.
• Professional Debt Assistance - Seek an attorney who specializes in debt protection. This should not be a bankruptcy attorney. Many debt settlement programs offer legal representation, however you may need a more dedicated legal solution than what can be offered through an attorney-based debt settlement program.
• Professional Debt Assistance - If you have been diligent with the strategies above, but you're still unable to gain ground after 3-6 month, then it is time to seek personal assistance.
• Professional Debt Assistance - If you are a home owner, consider entering into a Loan Modification program.
• Professional Debt Assistance - If you have over $10,000 in TAX debt, find a Tax Relief Representative.
• Professional Debt Assistance - If you have unsecured debt, such as credit card debt, consider entering into a Debt Settlement program. While credit counseling also alleviates credit card debt, your situation requires a little more horsepower than what credit counseling can offer.

You must prioritize which debts are paid first. Basic necessities take priority, such as food on the table and gas in your car to get to work. Next, you should pay your utilities and rent or mortgage. Also, any loans that tie into your home like a second mortgage or home equity loan, as these could be means for your home to be taken away. As for other debts including your auto loans, credit cards, personal loans, tax debt, student loans, and so on, you will have to prioritize yourself. You should also communicate with any debtors that you cannot repay, and try and work out repayment options. Seekig professional assistance through this process is recommended.

Be creative but most importantly be proactive and stick to your debt recovery plan. You have an opportunity here to free up thousands of dollars per month and regaining a positive cash flow. As unpleasant as enforcing a debt recovery plan can be, it can get so much worse if you do not take action immediately. Take charge of your household, including your children, and get the job done. This is a time for tough love.