When your debt is more than your income can carry

Protect the essentials first

When there isn't enough money for every bill, the CFPB suggests putting first the bills that protect your housing and your income, keep your insurance, and cover anything a court has ordered you to pay.

Unsecured debts like credit cards come after these. That can feel wrong, but missing a card payment usually hurts less than losing your home, your heat or your way to work.

• Housing: rent or mortgage, and property taxes if you pay them yourself.
• Utilities: electricity, gas, water and trash.
• Food and basic household needs.
• Getting to work: car payment, insurance, gas or bus fare, and childcare.
• Court-ordered payments, such as child support.

Talk to a nonprofit credit counselor for free

A nonprofit credit counselor can look at your whole budget with you and talk through your options. The National Foundation for Credit Counseling (NFCC) can connect you with a member agency at 1-800-388-2227 or nfcc.org.

If it fits, a counselor may suggest a debt management plan. You make one monthly payment to the agency, and it pays your creditors. Creditors may lower your interest rates or fees. The FTC notes these plans can take 48 months or more. Nonprofit doesn't always mean free, so ask about any fees up front and get them in writing.

To see how your monthly debt payments compare with your income, try our debt-to-income calculator before your appointment. It's a useful number to bring with you.

Call your creditors and ask about hardship programs

Many card companies have hardship programs, sometimes called forbearance or loss mitigation. Depending on the company, they may let you skip a few payments or pay less each month at a lower rate.

Call as early as you can, ideally before you fall behind. Explain what changed and what you can realistically pay. If you agree to anything, ask for written confirmation, and keep notes of who you spoke with and when.

Know your rights with debt collectors

The Fair Debt Collection Practices Act protects you from collectors who harass you with repeated, excessive or threatening contact. A collector generally has to tell you the creditor's name, how much you owe and how to dispute the debt, either when they first contact you or within five days.

If you don't think you owe it, you can dispute it and ask for proof. You can also tell a collector in writing to stop contacting you. That stops most contact, but it doesn't make the debt go away, and they can still sue. The CFPB has free sample letters for each of these situations.

If a collector breaks the rules, you can submit a complaint to the CFPB.

Bankruptcy basics, in plain words

Bankruptcy is a legal process in federal court. It can end with a discharge, which means you no longer have to repay certain debts. It's a big decision, and only a bankruptcy attorney or legal aid office can tell you whether it fits your situation. Many offer free consultations.

Chapter 7 is sometimes called liquidation. A trustee can sell property that isn't protected by exemptions and pay creditors from it, though the law lets you keep certain exempt property. If your income is above your state's median, a means test is used to decide whether you can file under Chapter 7.

Chapter 13 is for people with regular income. You follow a court-approved repayment plan, usually over three to five years, and it can let you keep property like a house while you catch up on missed payments.

Before filing either kind, you need credit counseling from an agency approved by the U.S. Trustee Program, within 180 days before you file. After filing, you need to finish an approved debtor education course to get a discharge. The U.S. Trustee Program lists approved providers. According to the FTC, a bankruptcy stays on your credit report for up to 10 years.

Free legal help

If you're being sued, facing wage garnishment, or wondering whether bankruptcy makes sense, legal aid may be able to help for free. Go to LawHelp.org and choose your state to see who serves your area. Each legal aid office has its own income rules.

Watch out for debt relief scams

The FTC says only scammers ask you to pay up front before they settle any of your debts or enroll you in a debt management plan. Be wary of anyone who guarantees to settle all your debts, and ignore unexpected calls or texts offering fast debt relief.

A reputable credit counseling agency will send you free information before asking for details about your situation. You can report a scam at ReportFraud.ftc.gov.