Debt Consolidation Blog

Archive for January, 2010

Due to prevailing economic conditions, Americans are mounted heavily in debt and get depressed with stress that is caused by debt. Many people who are deep in debt choose to end life as they feel it is the only option they have to get rid of overwhelming debt. The reason behind this is many people are not aware of the debt relief options available that is why many people choose the extreme and unwisely decision to pay off their debt.

There are number of options available with which you can bring the overwhelming debt under control. If you are the one who is undergoing hard time paying debt then read further to the know different debt relief options available.

First thing when you are trying to get rid of debt is make a budget which includes only necessities. Making budget does not solve the purpose but sticking to it will get you relief. Reducing the spending habits will help you save some bucks and pay off the debt.

If you are struggling to pay multiple creditors every month that charge different rate of interest then look for debt consolidation. This is a process where all your debt is consolidated into one loan. The debt consolidating loan will pay off all you debt existing where you have to pay only one monthly payment. Benefits of reducing to single monthly payments include lower monthly payments for long period of time, reduced rate of interest but it is impossible if you have bad FICO scores. The debt consolidation is especially important when you have low FICO scores because the options to get loans are limited for people with low scores.

Credit counselling: they help you in negotiating with your creditors to reduce the rate of interest and minimum monthly payments that ease you in paying off the debt. There are many non profit credit counselling services that help you through negotiating with your creditor in your hard times.

Debt settlement: it is process where the debt settlement service representative will negotiate with your lender to reduce the amount you owe nearly 50 percent. The reason why many are not availing of this service is many consumers remain confused about how exactly this process works. When you approach debt settlement company, the representative ask you to default on the monthly payments for 3 to 6 months and then start negotiating with lenders explaining your hardship and try to reduce balance you owe. A successful debt settlement negotiation can reduce up to 70% of the balance you owe and remaining can be cleared in few years to come with no stress. Remember that debt settlement works only for unsecured debt and must be considered as a viable option if you are seriously considering declaring bankruptcy.

Bankruptcy: it is a way where one can discharge all the debt but should be avoided at all costs because filling bankruptcy can have negative affects on you credit that last longer nearly for 10 years. Recent regulatory change have made it harder to start fresh life after filling bankruptcy, so consider it as only last resort after availing every possible way to get rid of debt.

I often hear from people who come to me for debt relief asking shall I file bankruptcy to discharge the credit card debt. But many people fail to recognize filing bankruptcy is not that easy as said. There are many questions to be answered before deciding.

When should some one declare bankruptcy? I say people must declare bankruptcy only as a last option because filing bankruptcy will ruin all your finance future as it will be listed on the credit report for at least 10 years. There are many options that one must try before which has less impact compared to bankruptcy.

Debt settlement is an alternative when you are thinking about bankruptcy because negotiation initiative with skilled and experienced professional can benefit you by reducing al most 70 percent of balances you owe where the remaining debt can be paid off with ease. Doing this will have very less impact on your finance future compared to filing bankruptcy.

Am I eligible to file bankruptcy and what type? In order to be able to discharge the debt by filing bankruptcy, the debt incurred need to be unsecured such as credit card debt, medical bills, personal loans etc. To file bankruptcy in court and trying to declare chapter 7 bankruptcy, the attorney dealing with you case asses your average income  over last 6 months and measure against the median income of the state in which the consumer resides. If your income lies above the median income of the state, you are required to answer a series of questions in order to determine your eligibility to file chapter 7 bankruptcy and if you are dealing with credit card debt, personal loans or any other kind of consumer debt and earns over the average median state income after all deductions then you may be forced to file chapter 13 bankruptcy. If your average income lies below the state median income then you will be asked a series of questions to determine your eligibility for chapter 7 bankruptcy.

New legislations introduced by federal government have made it more difficult to obtain full bankruptcy where all debt can be eliminated with no effect other than negatively affecting credit report. There some kinds of debt like federally managed or issued student loans that are not considered by bankruptcy laws and can not be discharged with chapter 7 and under chapter 13 repayment plan which is making more difficult for bankruptcy attorney to assist their clients in discharging their debt.

If it the situation what is the benefit of filing bankruptcy when you are unable to discharge total debt. At the same time you must compare the cost of filing the bankruptcy in court of law and attorney dealing with your case and what if you do not get relief after spending all the dollars – let them go in vein in this tough time?

Due to downturn in economy, debt has become a part of life but having too much debt can affect the quality of life and make the life miserable. When everything tried out to be useless like debt consolidation and refinancing, the last two alternatives to think about are debt settlement and bankruptcy. This are two potential way to clear the existing debt and start new financial life. But I often hear from many people that is debt settlement same as bankruptcy.

When looking to start the financial life from scratch, it is important to understand the difference between bankruptcy and debt settlement that help alleviate your financial woes.

Bankruptcy is no way related to debt settlement. Bankruptcy is to be considered as a last resort and I advice do not file bankruptcy unless you have no other choice. It will negatively affect your credit score and financial life in future for years to come. Where debt settlement is considered as an alternative to bankruptcy, if you are struggling with out of control.

In general, debt settlement is a process where the service representative will negotiate with lender in an effort to reduce the amount you owe by 50 percent, reduce interest rates, and monthly payments. When you approach a debt settlement service, they ask you to default on payments for at least 3 to 6 month and deposit affordable amount into savings account. After a handsome of amount is deposited into account, debt settlement service representative will start negotiating with one lender at a time and try to reduce your debt balance that range between 20 to 70 percent. If the debt settlement process works out, then you will need a lump sum of amount directly credited to creditor. Remember, no creditor will entertain payment plans with debt settlement process.

Debt settlement is service where the debt settlement service provider will assess your financial position and try to negotiate with your lender to explain your financial hardship to get out of debt. This is an out of court process that involves agreement between creditor and debtor but the debt settlement will not give any kind of relief from debt as the bankruptcy provides instead it provides up to some level of debt relief and that depends on the negotiation skills of the settlement service representative.

On the other hand, bankruptcy is legal procedure where the debtor has to file a case in court or hire an attorney to do the proceeding on behalf of you which will have an adverse affect on credit score.

Bankruptcy will be reported to credit rating agencies and will be in public records for almost 10 years but with debt settlement, period of defaults will be listed on the credit report. This means the affect of debt settlement has less impact then bankruptcy. However, both options adversely impact credit scores, but being is an unfortunate position and have to choose one of the options then I suggest debt settlement for getting out of debt.

In present economic conditions, most often we hear from many people about debt problems. Due to increase in unemployment rate and cost of living many are unable to meet their living expenses and as a result incurred huge debt. If you’re monthly payments is becoming burden or out of control and getting threatening calls from collection agencies then put a step forward and work a way out of crisis. This can be achieved either by reducing the amount you owe or by restructuring monthly payments that means debt settlement or debt management.

Here is how the debt management and debt settlement works for you:

Debt management is offered by credit counselling agencies when you need more than simple budgeting calculations to pay of your bills. In this process the debt counselling company negotiates with your creditors to restructure your debt like lowering rate of interest, reducing monthly payments in a way affordable to you. However the debt management covers only unsecured debt like credit card debt, medical bills, student loans etc.

In debt management process, the debt counselling representative will analyse your financial situation to evaluate your current financial situation like interest rate on your bills, amount you owe in total and minimum payment on each account and negotiate with creditors to lower interest rates and monthly payments. After analysing, they will prepare a suitable repayment plan with your creditors such that you can pay back outstanding amount conveniently. At the same time you can get rid of paying to multiple creditors as you make a single payment to Debt Management Company.

Debt settlement: it is a process where debt settlement company representative will negotiates with your creditors to get your debt reduced mostly around 50 percent of the amount you owe for which those companies charge you an upfront fee. Mostly unsecured debt like credit card debt, medical bills, personal loans, utility bills can be settled but debt like mortgages, car loans, federally insured student loans are not covered in debt settlement program.

Debt management is best choice if you are in any of the below mentioned situations:

• Having multiple bills that you are unable to manage them by yourself effectively.
• Getting calls from collection agencies and want to stop getting them.
• Tried out with self repayment plan and that wasn’t successful in clearing debt.
• Want to lower interest rate on the amount you owe.
• Want to reduce you monthly payments to the amount affordable according to your present income.
• Affected with present economic crisis and want to get rid of bills.

 Debt settlement must be a last option before filling bankruptcy as it may affect you credit score with defaults you make to allow the lender settle your debt. It usually takes 2 to 4 years to clear debt under debt settlement program and also depends on the total debt amount.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Prevailing economic condition is the cause of present downturn in Americans life. Almost one in every four Americans is knee deep in debt and is delinquent on debt payments. If you are facing same situation, cannot pay bills and want to avoid collection calls without filling bankruptcy then going for debt settlement is considered as a best option.

Debt settlement is a process where your debt settlement company negotiates with lender to reduce the outstanding debt around 50 percent of the amount you owe to them. This way of negotiation helps the debtor to get out of debt faster. The debt settlement can work with any type of debt like credit card debt, mortgage or personal loans. To assist you in the process of debt settlement process, the companies charge you with upfront fee. Are you thinking how this works out to get relief from debt? Here are the steps in detail:

Let’s say Lisa owes a total of $10,000 on 2 of her credit cards which she is finding difficult to keep up with at least minimum payments and she doesn’t want to file bankruptcy to avoid debt. In this situation when Lisa approaches debt Settlement Company, the debt settlement company offers you a program that includes:

• Stop payments to creditors: representative handling your case on behalf of debt Settlement Company ask you to stop payments to your creditors and deposit affordable amount into a savings account i.e. a trust account which debt settlement company creates for you.

• As Lisa falls behind on payments, starts receiving calls from collection department or collection agencies that are handling your account which will be handled by the debt settlement representative. That means getting rid of collection calls.

• As soon as you saved good amount of dollars in your trust account, the representative from the debt settlement company starts negotiating with your creditor’s one at a time. A skilled representative can reduce your debt up to 50 percent by effectively letting your creditors know your hardship. Finding that Lisa cannot afford to pay, her creditor agrees to accept the reduced amount to clear the debt in one attempt.

This way Lisa can clear the debt one account at a time with reduced amount she can clear the total debt with in a year.

Knowing how the debt settlement help you in getting out of debt, there are some pros and cons which you need to be aware of when opting for debt settlement programs.

Here are those:

Avoids bankruptcy: as you can pay off the bills comfortably with debt settlement, no need to file bankruptcy further.

One payment: no need of paying multiple payments to different creditors instead has to pay only one payment to debt Settlement Company and avoid any collection practices like collection calls harassment etc…

But as you have to default on payments for a creditor to reduce amount you owe, the defaults will appear on your credit report and therefore your credit score gets affected and after the creditor reduces the amount, the IRS charge you with tax as it sees the reduced debt as an income to you.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

Credit report is history that shows your payments habits. If you default on payments, the creditors will report to credit reporting agencies that maintain payments history. If you found a creditor listing on your credit report, then there are chances that you owe money to that creditor or any of its business entities for with the creditor underwrites.

When you find creditor listing on your creditor report, do not overlook as that may hurt your credit score. If you found a creditor listing on your credit report then here are the things that can likely to happen:

Creditor listing appears when you owe money to it or its business entity, pay off: it is likely to list on your credit report when you miss monthly payments. In that case, contact you creditor and speak to them and explain your hardship. Draft an appealing hardship letter requesting to lower the interest rates and monthly payments that can be affordable to pay off the bills. If you are in serious trouble and can not afford to pay on monthly basis, try to negotiate with them and settle you account by paying the amount affordable by you. With debt settlement, you can clear the debt much lower, almost 50 percent of the amount you owe and get out of debt legally.

If you are not sure of the entry listed on the credit report, then verify it whether you owe the dues. Send the debt verification letter to creditor requesting to prove the debt with them. This is important because negative entries on your credit report may harm your credit score and penalty for which you do not responsible is disgusting. If they provide proof of debt then work out with them for repayment plan or debt settlement to clear the debt faster.

If you found the creditor listing for which you are not responsible then dispute the listing with your creditor. Contact creditor and request them to co-ordinate with credit reporting agencies in a process of updating the account correctly.  While sending a dispute letter to creditor attach documents which proves your stance and make sure to send them through certified mail with acknowledgment which let you know that creditor has received your letter and when.

If you owe money to creditor and it is for a long period of time then check for statue of limitations before making payments as you can avoid making payments if the account exceeds certain period of time and still the creditor seeks payment. You can use statue of limitation as a defence and make sure to check the statue of limitations of the state you are residing currently.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

The Dollar Stretcher Blog
by Gary Foreman

I have a 5 year old that is a very picky eater. Will not eat veggies, except green beens or corn. Meat only hamburger or ham. Can you give me some suggestions as to what dishes I can make? My husband and I are tired of eating the same meals. Thank you.
Sonny

Sonny asks a good question, although at first I wondered if it weren’t better suited for a parenting column. But given more thought, it occurs that it really helps illustrate a point about raising financially responsible children. How so? Let’s take a look.

We’ll begin by considering what Junior is saying when he refuses to eat anything but hamburger or ham. Part of it is good. He’s exploring how much control he has over his world. And, although I’m not a child psychologist, that strikes me as healthy. It’s all part of the growth process.

The bad part is that Junior is attempting to dictate his surroundings. In effect, he’s telling Mom and Dad that he expects them to feed him only the things that he likes. And, it’s up to them to perform to his standards.

Sonny, understandably, wants to make her child happy. But making him happy now could set the stage for much unhappiness later. Now might be the perfect time to teach Junior a better way of relating to the world around him.

What does eating peas and carrots have to do with finance? In this case quite a lot. If Sonny gives in to Junior’s demands, he’ll expect that others will, too. Not only at dinner, but in other areas. It will be an unhappy surprise for Junior when they don’t.

He won’t know how to handle it when a boss expects him to perform a task that he doesn’t like. He’ll rebel when a purchase doesn’t make him as happy as he expected. In short, he’ll expect to get his way all of the time. And, as we adults know, that’s not the way that life works. Especially our financial lives.

So what can Sonny do to avoid mealtime boredom and a lifetime of financial frustration for Junior? She can begin by serving Junior a variety of foods. Whether he likes them or not.

If dinner tonight consists of chicken and mashed potatoes, then that’s what’s available for Junior to eat. He may fuss and demand something different. That’s when Mom and Dad need to tell Junior that nothing different will be prepared for him. He can choose to eat the chicken and potatoes or wait until the next meal. It’s his choice.

Chance are Junior will run away refusing to eat dinner. Don’t chase after him. If he asks for a snack that evening, inform him that you’re willing to reheat the chicken and potatoes for him. If that’s not acceptable he can wait till breakfast.

After a day or two, Junior will realize that Mom and Dad aren’t going to give in. He’ll be faced with a choice. Eat the healthy meal that’s presented to him or go hungry that night. It won’t take long before he discovers that chicken isn’t so bad!

It’s important not to get into a fight with Junior or to try to force him to eat. That could be bad for your relationship with your child. Just prepare a healthy meal (as a good parent should) and offer it to your child. Then give them the opportunity to eat if they’re hungry.

Ok, now let’s tie this back to Junior learning about personal finance. It’s important for all children to learn that we don’t always get what we want. Trying to do so will mean spending money that we haven’t earned. Buying things that we can’t afford. And, then expecting the world to fix the problem that we created.

Junior is much better served by learning early to adjust his wants to the world around him. He may want hamburger every night, but chicken is good, too. He may want a new luxury SUV. But he can afford a less expensive used cross-over. Not everything he sees in the store fits within his income.

So to answer Sonny’s question, she can make whatever dishes that she and her husband like. Not only will they be happier, but in the long run Junior will be happier, too.

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Gary Foreman is the editor of The Dollar Stretcher.com website <www.TheDollarStretcher.com> and various enewsletters including Financial Independence <mailto:subscribe-fi@hub.thedollarstretcher.com>
To learn more on teaching children about money click here  <http://www.stretcher.com/stories/01/011001b.cfm>

(end Dollar Stretcher Blog)