Debt Consolidation Blog

Posts Tagged ‘bankruptcy’

Declaring personal bankruptcy is not something to be considered lightly. If you are having financial difficulties that have you considering taking this ultimate step, take a moment to consider some of the fall out from going with this option. Both individuals and businesses are allowed to file for bankruptcy under current laws. In an effort to provide creditors with some form of restitution without overly penalizing the party who cannot pay, the government created bankruptcy as a viable alternative. In less hospitable times, they used to throw people into debtors prison. Thank goodness that has long since been done away with. Yet, a huge debt burden can often feel like you’re inside of a financial prison with no way out.

Feelings of stress and depression are common when you have a seemingly overwhelming debt to pay, but know you don’t have the means to make good on much of it. Filing for personal bankruptcy is a last resort option that can look like a quick and easy way out of your money troubles. But, let’s take a deeper look at the hidden cost of filing for bankruptcy.

The Filing Process

The laws and legal requirements of filing for personal bankruptcy vary from state to state, so this is something that you should not attempt to do on your own. You should consult with an experienced bankruptcy attorney who knows the system and is up on current bankruptcy law. Recently, the terms for bankruptcy have been revised, which makes it is much more difficult for individuals to file for Chapter 7 bankruptcy, which protects you from having to pay back most of the debt to creditors. Instead, it’s a lot more common to be steered towards Chapter 13, which requires you to pay back all of your creditors over time.

Again, an experienced attorney should be able to consult with you on the best course of action to take. Also, depending on your individual situation, it will cost you anywhere from $200 – $2,000 or more to have a filing done on your behalf. The more complex your situation is, the higher the expense.

Liquidation of Assets

Should you file for bankruptcy under Chapter 7, you must provide a list of all of your assets, including household items, clothing, collectible items, cars and other transportation vehicles, tools and so forth. The court will then review your total assets and determine which items are essential (clothing, some appliances, tools needed for work, etc.), and which are non-essential (gaming console, computers, TVs, motorcycle, etc.) to your daily life.

All non-essential items can be liquidated or sold off to other parties in order to raise money to pay off your creditors. Under this scenario, the creditors will have to settle for whatever amount they can get, which may be 50% or less of what is actually owed.

In order to go through this process, you’ll really need to accept that many things that bring you enjoyment will be sold in order to cover your debt. For instance, if you are really attached to grandma’s antique china, which was passed down to you from your mother, you’ll most likely lose this non-essential item. Ditto for things like a valuable coin collection or that restored 1950s Chevy.

Long-Term Bad Credit

A bankruptcy stays on your credit record for 7 – 10 years. That’s quite a long stretch of time to have to live with the stain of bad credit. During this period of time, it will be extremely difficult, if not impossible, for you to get anyone to loan you money to purchase a home, car or other big ticket items. Unsecured credit cards with large spending limits will also be a thing of the past. As far as the world is concerned, your credit worthiness is in the mud.

Diminished Employment Prospects

Another hidden cost of personal bankruptcy is having it appear on your credit report where others can see it. The risk of having a current or potential employer get wind of your bankruptcy is very high. In fact, a whopping 50% – 70% of all employers now do some sort of credit check as part of an overall background check for employment purposes.

What this means is that if you should apply for a promotion or job change within your company, you may be subject to another background check where your employer finds out you have this bankruptcy on your record. Particularly if you have a government job, this is more likely to happen than not. Or, if you are currently unemployed and searching for a job, a potential employer can take a look at that bankruptcy and determine you are not trustworthy enough for their needs.

Okay, now you should know that it’s technically illegal for employers to discriminate against anyone who has filed for personal bankruptcy. As a mater of fact, if they are having doubts about your employability after viewing your bankruptcy information, they are supposed to send you a “pre-adverse action” disclosure form, which gives you an opportunity to fix any incorrect items on your credit report. Similarly, if an employer chooses to fire you over a bankruptcy, they must send you an “adverse action notice,” which gives you the right to dispute any incorrect credit information within 60 days.

Unfortunately, both scenarios don’t protect you from employment discrimination over a bankruptcy if the employer decides to cover their tracks. They can simply claim to not hire you or fire you for other reasons. It is very difficult to prove that your bankruptcy is the reason you are not able to obtain gainful employment.

As the above points demonstrate, choosing to go down the road of personal bankruptcy involves taking certain risks that can make life much more difficult for 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 card debt is one of the leading causes of financial trouble in the U.S. It has a tendency to creep up on you while you are busy swiping those cards to pay for food, gas, clothing and many other things. If you are like many people, you have always felt a sense of ease when using your credit cards, simply because they are so convenient, and you know you aren’t going to have to pay off the entire bill each month. Perhaps you are relaxed with your current relationship with credit card debt because you have a steady income that covers the minimum payment on your outstanding balance.

You don’t even give it a second thought when you notice one of your cards is filling up to the maximum balance allowed. You reason that you’ve got a couple of other cards you can turn to when that one is completely maxed out. Sure, it’s nice to be so laid back with your spending when you have back up cards. But, what so often happens is that within a year, card number two has reached its limit, and card number three is half full. The problem with this type of credit card balance creep is that it’s leading you steadily into the bankruptcy danger zone.

The amount of money that you are bringing in every month equals the amount of your total available cash flow. This is the money that you have to use to cover all of your personal living expenses, including home mortgage or rent, car payment, food, electricity, other outstanding bills and miscellaneous expenses. Now, add in your credit card debt that probably amounts to several thousand dollars, and you can begin to see that your personal net worth isn’t really what you think it is. Those credit cards you keep on hand to use for just about everything have lulled you into a false sense of financial security.

Every time you swipe that card, you are not only adding to the total principle balance, but the interest due is also growing. With today’s sky high credit card interest rates, a significant amount of your monthly card payment is going only towards the interest. If you’re not careful, you’re quickly going to reach the tipping point where you owe thousands of dollars on several maxed out credit cards, but do not have enough personal income to handle large minimum payments each month. This is when that laid back attitude towards credit card spending is replaced by worry and stress over the huge dent that those bills are taking out of your personal monthly income.

When things get this bad, many people begin considering their options of filing for personal bankruptcy. If your credit spending habits keep going on unchecked, you too may quickly find yourself in this camp. Filing for personal Chapter 7 bankruptcy used to be much easier for individuals and couples who find themselves in deep credit card debt. However, the recent changes to the bankruptcy laws have made it extremely difficult to escape your debts under Chapter 7. Instead, most people are now directed to file for Chapter 13, which means you still have to pay all of your debts owed.

Bankruptcy not only ruins your credit record for 7 – 10 years, but it can also be publicly embarrassing when others find out that you’re completely broke. And, let’s not even talk about employers having access to your credit records where they can find out about this unfortunate situation.

So, how can you avoid getting yourself into a bad financial mess that leads you into bankruptcy? Well, the first thing you need to do right now is to get a handle on all of this easy-going credit card spending you are doing. You need to buckle down and do some serious budgeting and financial planning so that you can keep all of your personal assets right where they belong – in your possession.

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 decision to choose between debt consolidation and bankruptcy arises if you have reached at a point where you simply can not keep up the payments regularly then you might have to consider either debt consolidation or bankruptcy as a debt solution.

Without having enough knowledge about each, it seems both are easy and effective to get rid of debt problems. Although both debt consolidation and bankruptcy has their own advantageous and disadvantageous, debt consolidation seems to be a better route when compared to bankruptcy because as most of the people think bankruptcy is the end of debt problems which is not the case.

Debt consolidation means consolidating all unsecured debt from different creditors into one large debt amount. To consolidate you must have to sign a contract with debt consolidation service provider, who will arrange consolidation loan with which you can pay off all the debt with creditors in one go and pay monthly to debt consolidation service provider. With debt consolidation, the consolidator will manage to get you lower interest rate and monthly payments.

Consolidating all the debt into one debt means you have only one creditor. Having only one creditor meaning you will have to pay only one monthly payment before one due date instead of paying to several creditors every month like for different credit cards, store cards and other creditors. Having to pay different creditor monthly meaning each debt carrying different interest rates and requires paying each creditor depending on their due dates.

Apart from lower monthly payments consolidating debt has several other benefits. They are:

When you choose debt consolidation program, it is kept confidential i.e. the program is discreet and confidential it means the information of choosing debt consolidation program is not given to your employers.

Even though the debt consolidation appears on the credit report, it will not affect much of your credit score.

Choosing debt consolidation means you have to stop using all credit cards expect one for the emergency. It means you should make sure that debt is not incurred further.

Before opting for debt consolidation one must know that it covers only unsecured debt like credit card debt, store cards only. Secured debt such as mortgage, car loans and home equity loans can not be consolidated, however you may be allowed to keep them and use.

Bankruptcy is one such word that stops all the legal proceeding that is initiated against you. As bankruptcy involves legal procedure, a person filing bankruptcy need to hire an attorney and submit papers regarding your financial position to bankruptcy court. In this the judge is authority that decides which creditors will be paid and how much to be paid and which debts will write off.

For judge to take such decision on which debts to be cleared and which to write off, the attorney submits all the papers concerned to assets and the assets that are protected from bankruptcy liquidation.

After modifying the bankruptcy laws, filling bankruptcy is not a best choice because even bankruptcy does not write off some debts like secured student loan by fed and at the same time it totally blows your credit score and it will be reported on your credit report for minimum of 10 years.

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

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 the time of economic recession many individuals are being burdened with more of debts and every now and then bankruptcy is being reported. To help them stand back on their feet there is credit counseling. You definitely need the credit counseling if:

• When you find that you can’t even pay the minimum credit card charges.
• In case you are paying late for your utility bills.
• In case you are being constantly hounded by various collecting agencies and creditors.
• In case you fail to crack a negotiated deal with your creditor.

All you need to take care of is, choose the right credit counseling agency or the individual. Few years back, National Foundation for Credit Counseling dominated the scene. It was the non-profit organization which worked with the ultimate aim of negotiating the lower interest rates or the payment plans and helped individuals avoid bankruptcy.

There are hundreds of agencies which are competing with each other. Some of them provide excellent services and negotiate well the repayment plans. But, there are many service providers which are fraud and charge exorbitant fees. While choosing the credit counseling service provider, make it sure you keep in mind that the cost of credit counseling should not exceed the benefits of credit counseling.

When you are looking out for credit counseling service provider you must watch out for:

• Large Upfront cost: Consumer Credit Counseling Services charges a nominal fee of $10 set-up charges. In case you are being asked more than this to pay. It is a warning bell for you. Many-a-times it has been reported that many companies after the upfront payment vanish in the thin air leaving people all the more in the disgusted situation.
• No official recognition: credit counseling firms which have the certification from Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling are the legitimate ones. Other should be ruled out from the list. Thus, ask for the certificate proof. As it concerns your financial security.
• Missing payments: keep a check as to how much is being passed on to the creditors and what is charged by the company as any missed or delayed payment can hamper your credit report adversely.
• Unrealistic promises: if the credit counseling agency makes tall promises don’t be lured. If someone promises you to settle your debts for little money don’t give in easily. No creditor is crazy to settle for much less than what he lawfully deserves.

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