Information from the Washington State Department of Financial Institutions

Dealing with Debt

Debt can be overwhelming, but with the right strategies and resources, you can begin paying off your debt. This webpage offers tips on debt repayment options and resources to help you get rid of debt.

1. Assess Your Debt Situation

Start by taking a clear inventory of your debts. List all your outstanding balances, including credit cards, loans, and any other debts you may have. Knowing the total amount you owe is the first step in creating a plan to pay it off.

2. Explore Debt Repayment Strategies

There are several approaches to paying off debt, each with its own advantages. Consider these common strategies:

  1. Highest-Interest-First Plan (Debt Avalanche)
    Focus on paying off the debt with the highest interest rate first while making minimum payments on your other debts. This method helps you save money on interest over time and is the fastest way to get out of debt mathematically.
  2. Debt Snowball Plan
    Start by paying off the debt with the smallest balance first, then move on to the next smallest. This approach provides quick wins and can help build momentum and motivation.

3. Negotiate with Creditors

Contact your creditors to discuss the possibility of fee waivers, interest rate reductions, or lower minimum monthly payments. Many creditors are willing to work with you if you communicate openly about your financial situation.

4. Consider Credit Counseling

Certified credit counselors can help you develop a budget and a debt management plan. They provide professional advice and can negotiate with creditors on your behalf.

5. Know Your Rights

Washington State protects consumers from abusive debt collection practices under the Washington State Collection Agency Act. Debt collectors cannot harass you, threaten criminal prosecution, or call between the hours of 9 pm and 8 am.

If you continue to have problems with a debt collector, you can file a complaint with the Washington State Department of Licensing.

6. Avoid Debt Settlement Scams

Debt settlement companies are different from nonprofit credit counseling organizations. These companies often claim they can make a deal with your creditors to reduce the amount of debt you owe.

Dealing with debt settlement companies can be risky; you may end up in more debt than when you started.

Beware of companies that:

  • Charges any fees before it settles your debts
  • Tells you to stop communicating with your creditors
  • Guarantees it can make your debt go away
  • Tells you it can stop all debt collection calls and lawsuits
  • Promises you that it can settle all of your debt for a percentage reduction
  • Promotes a "new government program" to bail out personal credit card debt
  • Guarantees that your unsecured debts can be paid off for pennies on the dollar

7. Explore Additional Resources