To survive a debt trap, you need to stop new debt, create a strict budget, increase income, and tackle existing debt strategically (either by paying the smallest first for motivation or highest interest first to save money) using methods like debt consolidation or balance transfers, and seek professional help if needed. Face the numbers, cut expenses, and focus on one debt at a time to build momentum and regain financial control.
To get out of a debt trap: Combine multiple debts into one lower-cost loan with better terms, reducing overall interest and EMIs. Avoid accumulating new high-interest debt to prevent worsening your financial situation. Prioritise repaying high-interest loans to reduce overall interest and accelerate debt repayment.
Use this 11-word phrase to stop debt collectors: “Please cease and desist all calls and contact with me immediately.” You can use this phrase over the phone, in an email or letter, or both.
$30k is a perfectly manageable debt for most people with most jobs and living situations.
Special debts like child support, alimony and student loans, will not be eliminated when filing for bankruptcy. Not all debts are treated the same. The law takes some debts very seriously and these cannot be wiped out by filing for bankruptcy.
The "777 rule" in debt collection, also known as the 7-in-7 rule, is a guideline under the CFPB's Debt Collection Rule (Regulation F) that limits how often debt collectors can call you: generally no more than seven times in seven days for a specific debt, with a mandatory seven-day waiting period after a phone conversation before another call. This rule, established by the Consumer Financial Protection Bureau (CFPB), aims to prevent harassment by setting presumptions for acceptable call frequency, applying to personal debts like credit cards and medical bills.
The 2-2-2 credit rule is a guideline lenders use to assess a borrower's creditworthiness, requiring two active revolving credit accounts, open for at least two years, with a history of on-time payments for those two consecutive years, often with a minimum limit of $2,000 per account, to show financial stability for larger loans like mortgages. It demonstrates you can handle multiple credit lines responsibly, not just have a good score, building lender confidence.
The "15" and "3" refer to the days before your credit card statement's closing date. Specifically, the rule suggests you make one payment 15 days before your statement closes and another payment three days before it closes.
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
So, if you want to bypass a debt collector, contact your original creditor's customer service department and request a payment plan. They may be willing to resume control of your account and put you on a flexible repayment plan.
A 609 letter is a tool you can use to request information about items on your credit report or to challenge incorrect entries. It's named after Section 609 of the Fair Credit Reporting Act (FCRA), a federal law that protects consumers from unfair credit reporting practices.
If you do not want to deal with debt collectors on the phone, there is an easy exit door available: Send them a cease-and-desist letter by certified mail that says you no longer want to be contacted by them.
You might be able to get a debt management plan, an administration order or an individual voluntary arrangement (IVA). If you don't have any money to pay your debts there are still options that could help you. Depending on how much you owe, you might be able to apply for a Debt Relief Order (DRO) or bankruptcy.
The Five Cs of Credit are character, capacity, capital, collateral, and conditions.
You can too!
Improving your credit in 30 days is possible. Ways to do so include paying off credit card debt, becoming an authorized user, paying your bills on time and disputing inaccurate credit report information.
The bottom line
While the outcome varies, credit card companies will generally agree to lower your balance by 30% to 50% on average during settlement negotiations. The exact figure depends on your situation, the creditor and your approach, though.
What is the 50/30/20 rule? The 50/30/20 rule is a simple way to plan your budget. It suggests using 50% of your take-home pay for needs, 30% for wants, and 20% for savings and paying off debt.
While the exact range for a bad credit score in Australia can depend on the credit scoring model, usually a score between the range of 300-550 is considered a bad credit score.
By paying more than your required monthly mortgage payment, you can put that extra money directly toward the principal amount on your loan. Your interest payment is based on your principal balance, so by applying your extra payment to your principal, you could pay less in interest over time.
Highlights: Even a single late or missed payment may impact credit reports and credit scores. Late payments generally won't end up on your credit reports for at least 30 days after you miss the payment. Late fees may quickly be applied after the payment due date.
The worst a debt collector can do, which is also illegal, involves using force, severe harassment (like calling at all hours, abusing you, or telling others about the debt), deception (fake court letters), threatening illegal actions (jail time, which isn't possible for most debt), or taking unfair advantage of vulnerabilities like age or illness; they can't trespass or take your property without a court order, but they can pursue legal action leading to wage garnishment, asset seizure, or bankruptcy as a last resort.
That means a debt you haven't paid in 7+ years won't show up on your credit anymore. ✅ BUT: That doesn't mean the debt is legally gone. It's just no longer visible on your credit report. Collectors can still contact you, and in some cases, they can still sue you or enforce old judgments.
The FDCPA and Regulation F set forth broad prohibitions on using unfair, unconscionable, false, deceptive, misleading, harassing, abusive or oppressive practices or means to collect a consumer debt.