Knowing What You Owe

You may know you owe money, but you may not know how much.  This is not uncommon.  Debt balances change from month to month.  This could be because you have paid down the balance or because you have not paid and fees and interest charges are increasing the balance. 

If you want to get rid of debt, your first step is getting a handle on who you owe and how much you owe them.

Step 1: Get your credit reports.  This will list accounts that you have that are open.  It will also list any accounts that are in collections and any judgments from creditors.

Step 2: Get your banking history reports.  This will indicate whether you owe a bank or credit union money.

Step 3: Collect your bills.  If you have not been keeping up with your bills, go through your mail for the past three months and put all your bills in one folder. Then go through them.  You may find bills that are not on your credit report.

Step 4: If you are supposed to pay child support and haven’t, you may need to contact the child support enforcement agency in your area to find out what you owe.

Step 5: Think about whether you owe money to a friend or family member.  You may have to ask them how much you owe them if you don’t remember.

Once you have this information, make a list of:

1. The debts you owe
2. The name of the person, business, or agency you owe money to
3. The address and contact information for the person, business, or agency
4. The amount you owe
5. The terms of the debt—fees, interest, penalties for nonpayment
6. Payment due date

With this list, you can:

• Contact each creditor and verify your debt balances.
• If you cannot afford all of your debt payments, make arrangements with some or all of the creditors to pay in installments.  Before you do this, however, be sure you have developed a budget.  You don’t want to over commit your financial resources to debt and then not have enough to cover your rent.
• Settle some of the debts, but remember the consequences of settling debt.
• Consider debt consolidation, keeping in mind the costs and consequences of debt consolidation.
• Consider bankruptcy.

All of these decisions start with an understanding of how much you owe and who you owe the money to.