Posted: December 1st, 2011 | Author: Joe | Filed under: Debt | Tags: Bankruptcy, Credit Counseling, Credit score, debt consolidation, debt management, Guest Post, How To | 2 Comments »
Debt is an ongoing problem that plagues consumers around the world. Heavy debt is caused by various factors. Loss of job, divorce, and over extending one’s financial abilities are just a few ways debt sneaks up on hard-working people. If you are having a problem with debt, you are most likely wondering how to get out of it. Here are five common solutions.
1. Bankruptcy
Many people get scared and naturally want to solve debt by filing for bankruptcy. Bankruptcy is a legal status that clearly defines one’s inability to pay creditors. Depending on the chapter the debtor files, he or she may be excused from making any payments.
The downside to choosing bankruptcy as an option is the resulting credit status. A bankruptcy will remain on the consumer’s credit report for a period of seven to ten years. This status will make it difficult for that person to obtain any credit during that time. Bankruptcy should be used as a last resort when no other options seem feasible.
Debt consolidation is another common method to solving the problem of overwhelming creditor bills. The process involves merging all open accounts into one account. A consolidation can be done in several ways. One way is for the debtor to apply for a consolidation loan. The lender will write out a check big enough to cover all of the debtor’s open accounts. The debtor will then make payment to this single creditor.
A debtor could also perform a self-initiated consolidation by applying for a high limit credit card that would cover payment for all existing accounts. This is also a great method because some high limit credit cards offer excellent APRs. The down side is availability. If the debtor has already experienced several negative notations on his or her credit report, lenders may be reluctant to help. In addition, if that individual’s income is not enough to cover the debt payments, a consolidation will not be very beneficial.
(Read more about Debt Consolidation and Your Credit Score.)
Credit counseling services can provide consumers with advice on how to manage their bills. They offer a wide range of solutions from financial planning, to payment tips, to writing letters to creditors. Credit counseling services are not a bad idea. However, they are not free. So, the customer risks paying for something that may not work.
(Read more: 10 tips to help you talk to your credit counselor.)
4. Debt Management Company
A debt management company is a company that also offers a wide range of services to consumers in need of assistance. One thing they can do is negotiate with the lenders. They will attempt to convince lenders to lower interest rates and finance charges on the debtor’s behalf. Another service that these companies offer is a third party debt consolidation. In this situation, the debtor makes a lump sum payment to the debt management company and they pay of his or her creditors. DMC companies can possibly help to lower an individual’s debt. However, the bill can get costly and not every DMC is trustworthy.
5. Nada
Some people actually opt to do nothing to fix credit. They let the debt rack up in hopes that the seven-year period will pass before legal action wipes them clean. This is definitely not an intelligent idea. A smart debtor needs to be proactive for effective debt repair. With the right attitude and the will to make the situation better, a debtor can get from under the heavy weight.
This has been a
guest post from Leah Fields. Leah likes to write about home improvement, personal finance; she writes for
creditreport.org.
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Posted: December 16th, 2010 | Author: Joe | Filed under: Debt, Sponsored | Tags: Bankruptcy, Debt, Sponsored | No Comments »
The following is a sponsored post on behalf of PayPlan.
In these modern times debt problems do not have to lead to bankruptcy. There are a number of ways to avoid this and getting help and advice as soon as possible can set you on the path to regaining control of your finances and checking free advice from debt consolidation companies is a good place to start.
Debt problems occur for many reasons including loss of job, down scaling of work hours or the breakup of a relationship. What was once an affordable repayment schedule suddenly becomes major debt problems once circumstances change. This may be unfamiliar territory to most as the relatively prosperous years of the past two decades have made access to cheap credit easy without counselling against what can go wrong. Many of the financial disciplines within lenders also slipped as they raced to grow their businesses on the promise of ever increasing property prices and income
levels.
But now we are in recession the price is being paid as the number of people declaring bankruptcy rises dramatically.
Fortunately, the past ten years has seen a change in the laws affecting solvency for both individuals and companies and also a growth in help and advisory websites. These sites offer help and advice on how to get debt problems back under control and can offer customers practical assistance on setting up debt management plans or, should the need arise, a more structured Individual Voluntary Arrangement (IVA) with lenders.
IVA’s have certainly revolutionised the way debt problems can be handled and reduces the need for bankruptcy. It forms an interim solution between a voluntary debt management plan and bankruptcy by allowing for a formal agreement between borrower and lenders on how outstanding debt is to be repaid in the future. Typically a five year plan is agreed and any outstanding debt at the end of the term is written off by the lenders. IVA’s have to be arranged by licensed insolvency practitioners but many companies have ready access to the necessary qualified personnel to help and assist. If an IVA fails then bankruptcy may be the final option. Again, these companies can help and advise if bankruptcy is the only solution for you.
Bankruptcy can be avoided and should if possible. Despite the diminishing stigma attached to bankruptcy there are still some unpleasant consequences such as restricted borrowing rights, possible job restrictions and a public declaration of the facts and you may also lose your home. Getting practical advice from experienced companies can be invaluable. Once you recognise that you have debt problems then you should act fast since the earlier it is addressed the easier the solutions. The whole topic seems complex and confusing with options ranging from voluntary a debt management plan to bankruptcy and budgeting to consolidation loans. Getting sound advice will help you plot the path back to getting control of your finances and avoiding bankruptcy.
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Posted: March 15th, 2010 | Author: Joe | Filed under: Debt, Economy | Tags: Bankruptcy, Credit Cards, Debt, Economy, foreclosure, UnEmployment | No Comments »
Could you live off the rewards points and frequent-flier miles you’ve racked up on your credit card over the years? This man is. He’s a former executive from Southern California who’s become homeless since the bottom fell out of the economy in 2008.
He’s so far managed to keep his food bill to around $5 per day, and stays in hotels from Holiday Inns to Motel 6′s for the free breakfast and free Internet access.
It’s pretty amazing when you stop and think about it. He’s not entirely destitute, since he still drives a leased BMW and still has some savings, but it’s a testament to how far a person can stretch a dollar with a bit of creativity and the need to do so.
He’s gone from $120,000 plus bonus a year, living in a condo to bankruptcy, foreclosure and a keeping all his worldly possessions in a storage unit while he floats from hotel to hotel.
Click the image to view the video, compliments of KCBS.com.
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Posted: March 12th, 2010 | Author: Joe | Filed under: Debt | Tags: Bankruptcy, Debt, Mortgages, refinance | 1 Comment »
Don Taylor, over at Bankrate.com, recently received a question about Bankruptcy and mortgage refinancing that I think is a poignant reminder of how serious bankruptcy is and how long it can follow you.
The reader writes to Mr. Taylor and pleads his case:
We have about 60 percent equity in our home. We both have credit scores above 700 and both have good incomes. We recently tried to refinance our home mortgage loan at a lower interest rate but, because I filed for bankruptcy three years ago (with the discharge completed two years ago), the lender wasn’t willing to approve a loan with me as a co-borrower. (My spouse was not involved in the bankruptcy.)
The reader goes on to state that they have been in the home for 19 years, presumably with the same loan and bank. Mr. Taylor does remark on being surprised that the bankruptcy is still preventing them from refinancing their mortgage, so maybe they haven’t held this loan for the full 19 years. This point isn’t stated one way or the other.
Regardless, the fact remains that the bank seems to have more stringent standards than simply a good credit score. Many banks have underwriting standards that delve deeper in the borrower’s credit history – especially since the sub-prime mortgage meltdown. Apparently, this bank still weighs the bankruptcy more heavily than the current credit score.
Of course, the bank recommends that the reader’s spouse be the borrower, and that they can then get mortgage insurance to pay off the home in the event of the spouse’s death. This is not surprising as banks often make far more on selling loan insurance than they do on the loan transaction itself.
The bottom line is that a bankruptcy can have far greater and longer lasting impact than you may think, and that rebuilding your credit score alone may not be enough to offset the black mark on your history.
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