1. Managing Debt

2. The PICPA
The Pennsylvania Institute of Certified Public Accountants (PICPA) is a professional association of more than 22,000 members working together to improve the profession and serve the public interest.
Managing Debt

3. Outline Your Goals
Make a plan to pay down your debt (your financial goal). Include the following:
Your time frame for reaching each goal
The benefits of reaching each goal
The obstacles that may prevent you from reaching your goals and ways to overcome them
Managing Debt

4. Budgeting Basics
Before you can tackle your debt, you need to evaluate your budget.
Calculate your current income and expenses
Identify where you can cut costs
Be honest with yourself about how you got into debt, and change habits if necessary
Monitor your budget regularly
Managing Debt

5. Budgeting Basics Tips to help you stay on track:
Involve the entire family
Make budgeting part of your daily routine
Build rewards into your budget
Managing Debt

6. Types of Debt Good Debt Bad Debt Mortgages Credit card debt
Home equity loans
Auto loans
Lines of credit
Loans from questionable sources (payday lenders)
Second mortgages
School loans
Managing Debt

7. Dealing with Debt Debt reduction tips: Never miss a payment
Pay more than just the minimum
If you’ve fallen on a hardship, consider explaining the situation to creditors
Managing Debt

8. Dealing with Debt
If you fall behind on your payments, be proactive—contact your creditors and let them know your situation.
Know your rights if your debts go to a collection agency. Debt collectors cannot use abusive or harassing language, make threats, or add arbitrary fees to your debt.
Managing Debt

9. Debt Consolidation
If you are in a heavy debt situation, it may be time to consolidate.
One large loan taken out to pay off several smaller loans with different interest rates
Helps ensure debt gets paid on time
Only use loan to pay off the debt!
Managing Debt

10. Debt Consolidation Consolidation options: Equity loan
Vehicle refinancing
Cash-out refinancing
Personal bank loan
Negotiate better terms with original creditors
Managing Debt

11. Bankruptcy
If controlling your expenses and debt consolidation aren’t enough to tackle your debt, bankruptcy may be looming. Filing bankruptcy doesn’t make you a failure: it’s a responsible step toward improvement, but it should not be taken lightly.
Managing Debt

12. Bankruptcy Two types of personal bankruptcy: Chapter 7 and Chapter 13
Filing can be complex and difficult, and will have lasting effects (stays on credit report for 10 years)
Will not eliminate all types of debt, such as:
Child and spousal support
Most tax debts
Student loans
Managing Debt

13. Check Your Credit Report!
Your credit report tells creditors how well you manage your finances.
Influences decisions on loan approvals.
Equifax, Experian, TransUnion – report providers
Check to make sure personal/financial information is correct.
Checking frequently helps prevent identity theft.
Good Debt, Bad Debt, and More!

14. Good Debt, Bad Debt, and More!
Debt Counseling
A CPA or credit counseling service can help you develop a plan to climb out of debt.
Beware of unethical companies. Red flags include:
Unrealistic promises
Fees before settlement
Settling tax issues—only CPAs, attorneys, and enrolled agencies can represent clients before the IRS
Good Debt, Bad Debt, and More!

15. Good Debt, Bad Debt, and More!
Resources
PICPA’s Consumer Center:
360 Degrees of Financial Literacy
IRS
Good Debt, Bad Debt, and More!