Contacting Creditors

• The first step to restoring financial equilibrium is to get in touch with your creditors. Collection efforts are quite costly, so most credit card companies and other lenders will be happy to propose repayment solutions. Contact your creditors as soon as you realize you will be unable to make your payments as promised. Staying in touch with lenders will demonstrate that you intend to repay your debts. As a result, creditors will offer solutions unavailable to other borrowers.
  
  In many cases, a creditor can offer a payment forbearance or a graduated repayment plan to keep an account current while you regain your financial footing. Some creditors may even be willing to forgive past-due amounts in exchange for payment promises. If you enter into a payment agreement with a creditor, make sure to keep your promises. This will reduce the likelihood that a creditor will report your delinquency to the three main credit reporting bureaus.
  
  

Credit Counseling

• Another option is to contact a credit counselor to negotiate with creditors on your behalf. These companies will help you devise a repayment strategy to fulfill your debt obligations. In some cases, a credit counselor can even secure a reduced interest rate, so you can pay your debts more efficiently. If you do not make your payments on time, though, the creditors can continue collection efforts, including phone calls, letters and wage garnishments.
  
  

Taking No Action

• Although not recommended, taking no action at all is a viable solution for some debtors. If you do not anticipate an income increase in the future, creditors will realize that a court judgment will not help because they cannot collect on that judgment. Creditors typically will not enforce legal action against debtors who have few assets that can be liquidated to pay debts. Although a lawsuit is still a possibility, many creditors choose to write off uncollectable debts instead of spending the time and money to pursue payment. Uncollected debts will disappear from your credit report after seven years.