Posts Tagged ‘bankruptcy’


5 Ways to pay off debt
Tuesday, August 24th, 2010

There are 5 ways to get rid of debt and lead a stress-free life. But what’s important is that you choose the one that works for you.

1. Interest rate arbitration: This is where you choose an independent third party to negotiate low interest rates with your creditors. So, you can consolidate multiple bills with one low monthly payment. This is also known as loan consolidation. The benefits are:

  • Pay less each month
  • One monthly payment instead of many
  • Credit score improves

2. Debt management: This is where you work with a debt solutions company to help you pay off your debts and create a budget. The benefits are:

  • Interest is reduced
  • Late fees may be waived off
  • Manage multiple bills with ease

3. Debt settlement: This is where you have a settlement company/law firm working with your creditors to lower your payoff amount by 40-60%. With settlement, you have 2 major benefits:

  • Creditors reduce interest
  • They cut your principal balance

4. Chapter 13 bankruptcy: Chapter 13 is a court monitored debt repayment plan. The benefits are:

  • Creditors reduce interest on your debt
  • They trim the principal debt balance
  • You don’t use your assets to pay off debt

5. Chapter 7 bankruptcy: This is where you hand over your assets to a court-appointed trustee who sells them off and uses the sale proceeds to pay off your debts. With Chapter 7 bankruptcy, you get the following benefits:

  • Interest on your debt is lowered
  • Principal balance is reduced

However, your credit score takes a hit and it’ll take quite a few years till you actually rebuild your score.


Debt Doesn’t Discriminate
Tuesday, August 24th, 2010

Debt – it can happen to anyone. Some think that those who bring in a “certain level” of income are immune to financial hardships, but that simply is not the case. Often times, we hear stories of wealthy individuals or huge corporations filing for bankruptcy because of uncontrollable circumstances or poor financial planning.

In a story released this week by The Guardian, we learned that even royalty isn’t immune to debilitating debt, as Sarah Ferguson, Duchess of York, is considering filing for bankruptcy after years of money woes. The article states that the Duchess is considering a number of ways to manage her personal finances, but has yet to settle on one option:

Ferguson‘s spokesman said she was reluctant to declare herself bankrupt. “There is a number of options open to the duchess, of which bankruptcy is one. But it would be premature to say she is going into bankruptcy as the situation is being managed,” she said.

Many people around the world, no matter their income, are currently weighing their options for dealing with large amounts of debt. While bankruptcy is one alternative, it may not be right for you. Consider credit counseling or debt settlement as alternative to bankruptcy – these options take less time and have a smaller impact on your credit score and history.


Determine the Extent of Your Debt Problem
Tuesday, July 13th, 2010

Determine the Extent of Your Debt Problem

Step 1
Request a copy of your credit report from one or all three major credit reporting agencies in the U.S. The companies are TransUnion LLC, Equifax Credit Information Services, Inc., and Experian.
Step 2
Review your credit report and check for inaccuracies, such as incorrect personal information, accounts that do not belong to you and even accounts listed with balances that are actually paid in full. It’s also important to know your FICO score, which is a credit score system. The acronym ‘FICO’ is derived from the name of the software used to calculate the score. While FICO scores range from 300-850, the average score is somewhere in the high 500s.
Step 3
Determine how much debt you have by adding up the balances of all of your credit accounts, loans, both secured and unsecured, and even collection accounts.
Step 4
Use this information when making your decisions about filing for bankruptcy or employing a debt settlement agency to help alleviate your financial problems.

Examine Your Monthly Finances

Step 1
On a sheet of paper, list all of your monthly income including paychecks, alimony/spousal support, child support, bank, investment and rental interests or income. If you work overtime or receive bonuses, include that information, too. If you opt for filing bankruptcy, you will need to include your average monthly income from the six months prior to filing in your bankruptcy petition, so it’s important to get these numbers no matter which solution you opt for, bankruptcy or credit counseling.
Step 2
On another sheet of paper, list all of your mandatory monthly living expenses, such as for housing, transportation, insurance, prescriptions and doctor visits, utilities, groceries and education-related costs. Don’t include payments for credit card debts, entertainment, or other items that are not necessary for your day-to-day survival. Definitely do not list an expense twice. That means if you used your credit cards to buy prescriptions, include that cost in your mandatory expenses list. However, if you used your credit card to buy a shirt, do not list the purchase on your mandatory expenses list at all, unless it was necessary for say, work.
Step 3
Subtract the total of your monthly living expenses from your total monthly income. A balance indicates you have expendable income you could potentially use to pay down your debts. A zero or negative balance indicates you do not have expendable income that could be used to pay down your debt.
Step 4
These calcuations are important for helping you formulate your decisions about filing for bankruptcy or seeking the aid of a debt settlement agency.

Determining if Debt Settlement is Right For You

Step 1
Determine if you could pay down your debts with your current income. If your income does not exceed your housing expenses, utilities, gas, groceries, and basic financial needs for the month, debt settlement is not a viable solution for you. However, if your monthly income exceeds your basic living expenses, debt settlement may help you resolve your financial crisis.
Step 2
Determine if your debt situation qualifies for debt settlement services by examining the total amount of unsecured debt you owe. To qualify, you will usually need to owe at least $7,500 in unsecured debt. However, the qualifying balance will vary by debt settlement company. Make sure you ask each debt settlement company about their unsecured debt balance requirements to determine which debt settlement company is right for your situation.
Step 3
Look for reputable debt settlement companies. Companies that charge huge fees up-front are companies to be avoided. Opt for debt settlement companies endorsed by the Better Business Bureau, or some other reputable pro-consumer group. Make sure to check that their fees are reasonable for the services rendered.
Step 4
Compare the services each company offers. Look for companies with a sound history of effectively negotiating with creditors. Ask for references or case studies you can examine that prove the company’s track record. If company representatives are hesitant to provide you with that information, walk, don’t run, out their door.
Step 5
Examine the pros and cons of committing to a debt settlement program. Ask the debt settlement company if by hiring them to represent you to negotiate your debts will your various creditors how your life might be impacted. Will those harrassing creditor calls stop? (possible, but no guarantees. Creditors can still contact you for the collection of debts they are owed unless or until you file bankruptcy). Also, inquire how a debt settlement program will impact your credit in the future and what the long-term side effects to your credit might be.
Step 6
Make sure you are prepared for the drawbacks of debt settlement programs such as the potential for increased creditor calls, possible collection lawsuits initiated by creditors, damaged credit and tax problems. If you don’t think you can handle these possibilities, then you should probably look for another debt solution.

Determining if Bankruptcy is Right For You

Step 1
Determine if you have any other options for resolving your financial crisis short of filing bankruptcy. Look online for other solutions to your debt problems such as debt settlement, debt management and nonprofit assistance. In addition, attorneys who practice bankruptcy law have begun to offer debt settlement services to clients who might have filed a bankruptcy before the Bankruptcy Code was overhauled in October, 2005, and find the new laws too onerous.
Step 2
Determine if you qualify for bankruptcy by reading the most current version of the U.S. Bankruptcy Code, found in Title 11 of the U.S. Code. However, the revamped Bankruptcy Code is extremely complex to understand, so don’t be surprised if you aren’t able to comprehend much of what you are reading. The Bankruptcy Code can be found online. Many books attempting to explain the Code in plain English have been written, so check out your local library or bookstore for some helpful titles. Even if you discuss your financial problems with an attorney who specializes in bankruptcies, you might still want to read up on the law for yourself.
Step 3
Determine which bankruptcy chapter you qualify for by reading the descriptions of each type of bankruptcy, as well as by reading the rules and regulations associated with each. This information can be found at your local library, bookstore, online, or by talking with an attorney who handles bankruptcies in their everyday practice.
Step 4
Court costs for filing bankruptcy are different depending on which chapter you file. Currently, a Chapter 7 bankruptcy costs $299 in filing fees while a Chapter 13 costs $274, although Congress can change those fees at any time. It will also be important to learn how much an attorney will charge you to represent you in your bankruptcy. If you meet with a bankruptcy attorney, they will likely give you a written fee quote for their services either at your first meeting or perhaps in the mail. Do not expect to be able to email a bankruptcy attorney for a price quote on what they would charge for their services. Bankruptcy is an extremely complex area of law and an attorney well familiar with the law’s complexity wouldn’t likely give you a fee quote over the phone or in an email without knowing your entire financial picture. Would you call a doctor to ask how much it would cost to set your broken arm? Do you think the doctor would even come to the phone, and secondly, do you think they should or would give you an answer? They don’t know how broken your arm is by talking to you on the phone and a bankruptcy attorney doesn’t know how bad your financial situation is until they meet with you to discuss it.
Step 5
Another important consideration is deciding whether filing for bankruptcy will resolve your credit problems. Depending on the types and amounts of your debts, a bankruptcy filing won’t necessarily rid you of your duty to pay some of your bills, even though you filed for bankruptcy. Keep in mind that a bankruptcy filing remains on your credit record for ten years but a bad debt is only supposed to stay on a credit report for seven.

Read more: How to Compare Debt Settlement vs. Bankruptcy | eHow.com http://www.ehow.com/how_2002283_debt-bankruptcy-settlement.html#ixzz0tURSWGS0


Bankruptcy Alternatives
Saturday, July 3rd, 2010

Before you make any decisions about filing bankruptcy make sure you consider all of your options. Here are some alternatives.

1. Judgment proof: This is the most basic alternative. Simply you have to take no action at all. With a very small income, if you owe money to creditors you may be considered as judgment proof also known as collection proof. That means if your creditor sues you, he just won’t be able to collect because you don’t have any thing which they can legally get hold of. So in most of the cases creditors may decide to write off your debts. But you have to keep one thing in mind that if your financial condition gets improved in future then you will not be consider as judgment proof any longer.

2. Call Creditors: Don’t try to shun off from the situations. It is always better to call the creditors and convince them about your financial situations. They may come up with an alternative pre-payment plan which can get you out of this catchy situation.

3. Chalk out the Budget: Before arriving to any decision of filling for bankruptcy, take a good look at your detailed information of monthly income and monthly expenses. This will help you in better understanding of your resources and a more organized way can avoid bankruptcy.

4. Balance Transfer: In some cases you will be able to transfer your loans from higher interest rates to lower ones. You can also apply for a new credit card which can offer low interest rates. But be sure of the introductory lower rates as they do not serve the purpose.

5. Refinancing Loans: If you are credit worthy or in good books of your creditors you can get a refinance with better terms which can help you to clear of the previous debts to higher rates.

6. Negotiations and Settlement: If you are confident enough that this adverse, tricky financial condition is temporary, then with Negotiation and Settlement with your creditors your benefits are higher. In this process you have to negotiate with creditors and work out a new re-payment plan. There are many competent settlement companies that will help you get into the right payment program and help you become debt free in less then 36 months.

7. Credit Counseling Services: Instead of negotiating personally you can contact these agencies which normally are nonprofit organizations and you can found them on United States Trustee’s associated website. These agencies work with the aim of reduction of interest rates or full amount of debt.

8. Individual Voluntary Arrangement: It is a good alternative to bankruptcy. It is a formal proposal by the individual to his creditors to re-pay a percentage of total loans over a certain period of time (in most cases it is usually 5 to 7 years). With this alternative sometimes as much as 60 % of the principal amount is written off. Even monthly payment can be kept very low.

There has been a great increase in number of people choosing the alternatives for bankruptcy of late. As there are many benefits like keeping our own assets, having no effect on professional qualification, no adverse effects on social status and credit scoring; you have to consider all your options carefully before filling bankruptcy.


Harmful effects of Bankruptcy
Wednesday, June 30th, 2010
Lured by the exotic loans or attractive loan schemes, you may sometimes land yourself in a situation where you will lose the balance between your monthly income and monthly expenditure. It is a financial catchy position where you can find it difficult to make your monthly payments. You may be you are thinking about filing Bankruptcy. But did you know, declaring Bankruptcy may not be the last option available. Did you know there are alternatives to Filing Bankruptcy?

Filing for bankruptcy is a difficult decision to make. While filing Bankruptcy can assist you in alleviating your dues and debts, it can also affect you more adversely than you can think of.

Bankruptcy can have disturbing effects on personal and professional life for longer duration. It affects your credit rating and borrowing capacity in near future. Hence, declaring bankruptcy should be considered as last resort.

There are other alternatives available which can pull you out from such awkward positions. There are numerous reasons for people to avoid bankruptcy.

  1. People filing bankruptcy have to bear the loss of their assets. In most of the cases court used to sell those assets like house, plot or even car to clear off debts.
  2. Whenever you file for bankruptcy, then control goes to the magistrate handling your case and your fate can be decided by him judging the information received by Official Receiver.
  3. Bankruptcy has a very devastating effect on your credit history for at least next 7 years. With such a poor credit score it becomes very difficult to get a loan or mortgage to start a fresh life.
  4. Declaring bankruptcy can ruin your career prospectus. There are certain careers which do not accept you if bankrupt. Even there are few restrictions on being director or owning business.
  5. Being bankrupt hampers your social life to much extent. It is quite embarrassing situation once your bankruptcy gets advertised in newspaper.

Credit Card Counseling vs. Debt Settlement
Wednesday, June 30th, 2010
It is obvious that credit card debt can hinder your financial success. Eliminating excessive debt sometimes means choosing between seeking credit counseling with a third party or negotiating a settlement directly with the lender.  Both of these alternatives have advantages. It’s important to determine exactly which solution is best for the problem at hand financial planning is complicated, but with a little patience and research it becomes easier to make constructive choices. Of course, each individual must decide what works best in the current economic climate.  Seeking counseling to help reduce or eliminate high interest credit payments can help borrowers resolve debt problems.

Clients pay the credit counseling firms directly, either through consolidation or monthly payments. The agency then takes care of paying the bills. These companies help consumers in several ways. The most important service they provide is skillful negotiation with lenders. Since creditors have widely varying policies, the counselors must be up to date on the most current information. They can then use that information to bargain for a lower interest rate reduced payments, or even consolidation of certain loans. In addition, they can provide advice on budgeting, handling money, and effectively operating in the financial world.

If the situation has progressed, debt settlement becomes a possible option. In this process, the consumer or company representative negotiates to reduce the principal amount of a loan. Although many people do not know about this, it can be done by any borrower. First, the loan must be declared to be in default. This may have happened already if no payments have been made for several months. Once defaulted, a loan becomes a loss to the lender, which means that the lender will often accept a much smaller total amount in order to recover at least some of the money owed. Settling debt will eliminate debt more quickly and efficiently.  Debt Rehab offers the best alternative to bankruptcy available to the consumer.

Getting out from under a financial burden can be the first step to success. Becoming an affiliate of Debt Rehab will allow you to offer seasoned advice on the right personal debt management plan. The best option is dependent on personal preference, financial goals and the current economic climate. Taking all these factors into consideration can help resolve debt problems with a minimum of negative consequences.


Do it Yourself Debt Settlement – The Top Seven Things You Need to Know
Friday, March 26th, 2010

Want to get rid of your debt but don’t want to file for bankruptcy or risk foreclosure? If so, debt settlement is an option worth considering. You might think you can’t settle your debt on your own, but the truth is you can do it yourself. There’s no law that says you have to hire a company to handle the debt settlement process. In fact, hiring an outside company usually means paying the company a hefty commission based on the total amount of your debt.

The key to successful debt settlement is negotiation and it’s a skill anyone can learn. Just follow these seven simple steps to do it yourself. Remember when you negotiate, you’re not only reducing the amount you pay individual credit card companies each month. You’re also lowering your total debt by 50 to 80 percent.

Once you start negotiating with creditors you’ll find that settlement amounts will vary. Some may offer as low as 30% and others up to 50%. Some will even forgive most of the amount you owe. Try it and in about six months you’ll be off to a fresh start.

Here are seven debt settlement and creditor negotiation steps you can do yourself:

1) First you need to accumulate a sizable amount of unmanageable debt, which you’ve probably already done since you’re thinking about settling.

2) Next you have to determine that debt settlement is your best option.

3) Once you make that determination, stop making your monthly payments.

4) Take the money you would have spent making those payments and put it into a savings account. Or if you can, try to get a loan with a low or zero percent interest rate from family or friends.

(more…)


Bankruptcy, what is it and how to avoid it
Thursday, March 4th, 2010

In this economy, many people find themselves facing difficult financial situations.   Certain circumstances such as unexpected medical bills, credit card bills, and divorces can surely present further challenges.  When the burden of debt becomes overwhelming, many believe filing bankruptcy is their only option.  Bankruptcy can be broken up into two categories:

Chapter 13 Bankruptcy– In this type, the debtor proposes a plan to repay creditors over a three to five year period during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions.  Exemptions refer to properties that the law allows for the debtor to keep.  The debtor will then make regular payments to creditors through a trustee and will not be discharged of the debt until the payments are complete.  The debtor is, however, protected from wage garnishments, lawsuits, and other creditor action while making the payments.

Chapter 7 Bankruptcy-This type requires the collection of the debtor’s assets by a trustee who then distributes the cash obtained from those properties to creditors.  In order for creditors to receive any money from the assets, they need to file a claim with the bankruptcy court which will deem their claim justified as it sees fit.

(more…)


Debt settlement, debt consolidation, and credit counseling…What’s the difference?
Tuesday, March 2nd, 2010

There are a lot of companies out there who entice those with a significant amount of debt with hope for a way out.  Although their purpose and method may seem confusingly similar, they are in fact very different and their distinction must be noted.  One type of relief designed to help those in debt is what is known as debt consolidation where borrowers are offered one big loan to pay off their small debts.

(more…)