Debt Recovery Plan
Understand why debt crisis signals: (1) minimum-payment-only pattern, (2) borrowing for food/rent — debt funding necessities signals income-debt mismatch, (3) hiding debt — shame and secrecy indicate loss of control, (4) missed payments — falling behind signals the debt exceeds repayment capacity.
5
Lessons in this module
Signs of a debt crisis
Understand why debt crisis signals: (1) minimum-payment-only pattern, (2) borrowing for food/rent — debt funding necessities signals income-debt mismatch, (3) hiding debt — shame and secrecy indicate loss of control, (4) missed payments — falling behind signals the debt exceeds repayment capacity.
Debt management plans
Understand why consolidation: refinancing — you repay everything but more efficiently.
Negotiating with creditors
Understand why creditor negotiation requires preparation: (1) realistic proposal — offer what you can actually sustain, not an optimistic number you will miss again, (2) hardship evidence — medical bills, job loss documentation strengthen your case, (3) full loan details — know your numbers before the call.
Snowball vs avalanche method
Understand why core difference: snowball optimises for motivation (quick wins), avalanche optimises for total interest minimisation.
Practical recovery steps
Understand why compounding interest at high rates means early payments mostly service interest.
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