Posts Tagged ‘debt settlement’


Debt Settlement vs. Bankruptcy
Sunday, January 20th, 2013

Whenever people think of breaking free from debt, the no.1 solution that they think of is to file for bankruptcy. Getting the court’s protection from the Collection Company or lender and having not to think of the minimum monthly payments you need to make every month sounds like a great idea. However, bankruptcy has bad “side-effects” for the individuals filing. Therefore, wouldn’t it be better to settle your debt?

Starting Debt Settlement

Before applying for bankruptcy, people can try debt settlement first. This is also known as debt negotiation, which is usually used to settle unsecured debt.

Debt negotiation or debt settlement is done by bargaining with the lender to lessen the debt amount. This is done so it is agreeable to both parties involved in the debt negotiation process. Usually, the debtor goes through a debt relief program that is offered by companies specializing in this area of work.

A good starting point

There are advantages to debt settlement over bankruptcy as seen below:

  • Lenders prefer this method – of course, lenders would rather choose debt negotiation than have the debtor file for bankruptcy. If bankruptcy is filed, there is a chance they may get nothing or a small amount of monies due from the court. Therefore, this allows negotiating with lenders for debt settlement.
  • Debtors won’t lose everything – the worst part of bankruptcy is that you, the debtor, has to give up all assets to pay off the debts. The money gained from liquidating properties owned, will be distributed to the lenders. When this happens, the individual and their family has to start from scratch.
  • Has lesser effect on your credit – not all lenders report debt settlement to the credit bureaus, unlike bankruptcy. Therefore, the debtor has a better chance to keep his credit clean.

Those that need help in debt settlement can consult Debt Rehab. They can seek advice whether this is the best solution for them. The company has a debt relief program that is convenient for those who need freedom from debt.


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.


Is a Debt Settlement Program just a Scam?
Tuesday, August 24th, 2010

For starters it is important for people to understand what debt settlement is and how it works. The main goals a consumer is trying to reach with a debt settlement program are twofold, one is to save money on how much debt they currently owe and the second is to become debt free as fast as possible. Now one thing must be understood, debt settlement is not for everyone, and what I mean by that is the process is not the easiest to go through and people must understand that prior to enrolling into a debt settlement program. In order to get a settlement on any of your credit card accounts you must first realize that falling behind on the payments for these accounts is necessary. There are no creditors anywhere that are willing to negotiate a debt settlement when someone is current with their payments. I mean if you think about it why would they? If they feel you can maintain your monthly minimums that is right where they would like you to stay. It’s called the “credit treadmill”, a vicious cycle of minimum payments that will last over thirty years and cost the consumer tens of thousands in interest. This is precisely how the creditors make so much money and this is right where they would like you to stay.

So you must understand that during the debt settlement process you will have to fall behind on your debts for the creditors to settle with you. Once you stop paying them they completely change their tune and are much more receptive to reducing your debt drastically. Like I said earlier this process will not be for everyone some people cannot come to grip with the fact they must fall behind on the payments and that is unfortunate. For these people they will stay slaves to their creditors for what may end up being decades and lose a whole lot of money throughout the process. Now during that time when a debtor is falling behind on payments the goal will be to save up as much money as possible. This will then enable the debtor to be in position to have a negotiation made thus making a one time payment to the creditor closing out that particular account. This process is repeated over and over again until all the accounts have been settled and the person is then debt free. With a good and reputable debt settlement company the client can expect to save around 50% or more of what they currently owe including paying the fee as well.

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Debt Settlement Law Firm vs Debt Settlement Company
Tuesday, August 24th, 2010

Unless you have been living under a rock, you should understand that the American marketplace has seriously gone down south. People have been losing work, their places of residence, and many their sanity. A single difficulty that has pretty much been haunting consumers since this has occurred is large amounts of consumer credit card debt. Debtors can be found trying to beat large monthly premiums that practically never seem to go down plus interest rates that are totally absurd. One plan that has been truly proving to be a success for most consumers is credit card debt settlement; however there are two forms of debt settlement programs. Currently, there are business models that can be setup using a lawyer and then programs that can be set up with a standard service. The former is what will be able to really present debtors a great possibility to become debt free in the least amount of time with the least amount of concerns.

With a credit card debt settlement program, the debtor must fall into delinquency on their minimum payments and save money on the side. This will allow them to in time work out a one time lump sum payment and close the deficit out. Oftentimes the consumer can salvage about half what they owe plus find themselves out of debt in just a couple years. That is very good; however there are a couple downsides with debt settlement that can make using a lawyer more beneficial to the consumer. For starters once you fall past due on the debts the lenders can try to gather the balance due through calls. A law firm has the ability to lawfully limit collection agencies from constantly harassing the client, at which a company cannot. One more downside to the debt settlement plan will be the potential for getting sued. With having retained a law firm, then they will lawfully interact with and still negotiate with a bank who will be making an effort to take somebody to the courtroom. This is a great selling point for people when using a debt settlement law firm over a company.

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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.


Chase Credit Card Settlement
Thursday, July 22nd, 2010

Credit card debt is one of the main problems that is facing people all around the US, and the Chase credit card is one of the most commonly used card. The highest interest rates, coupled with diminishing wealth during the economy downturn, debt is rising at breakneck speed. Today, people owe more on their credit cards because they are using those cards to cover things that their paychecks no longer can. It is possible to negotiate with the company, with the help of a debt settlement company, to help with a Chase credit card settlement.


Business Process Outsourcing Benefits (BPO)
Tuesday, July 20th, 2010

Debt Rehab is a business process outsourcing company.  An advantage of BPO is the way in which it helps to increase a company’s flexibility. However, several sources which have different ways in which they perceive organizational flexibility. Therefore business process outsourcing enhances the flexibility of an organization in different ways.

Most services provided by BPO vendors are offered on a fee-for-service basis. This can help a company becoming more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible. Outsourcing may provide a firm with increased flexibility in its resource management and may reduce response times to major environmental changes.

Another way in which BPO contributes to a company’s flexibility is that a company is able to focus on its core competency, without being burdened by the demands of bureaucratic restraints. Key employees are herewith released from performing non-core or administrative processes and can invest more time and energy in building the firm’s core businesses. The key lies in knowing which of the main value drivers to focus on – customer intamacy, product leadership, or operational excellence. Focusing more on one of these drivers may help a company create a competitive edge.

A third way in which BPO increases organizational flexibility is by increasing the speed of business processes. Using techniques such as linear programming can reduce cycle time and inventory levels, which can increase efficiency and cut costs. Supply chain management with the effective use of supply chain partners and business process outsourcing increases the speed of several business processes, such as the throughput in the case of a manufacturing company.

Finally, flexibility is seen as a stage in the organizational life cycle. BPO helped to transform Nortel from a bureaucratic organization into a very agile competitor.  A company can maintain growth goals while avoiding standard business bottlenecks.  BPO therefore allows firms to retain their entrepreneurial speed and agility, which they would otherwise sacrifice in order to become efficient as they expanded. It avoids a premature internal transition from its informal entrepreneurial phase to a more bureaucratic mode of operation.

A company may be able to grow at a faster pace as it will be less constrained by large capital expenditures for people or equipment that may take years to amortize, may become outdated or turn out to be a poor match for the company over time.


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


Credit Card Debt and the US Economy
Thursday, July 8th, 2010

The United States under Obama is just turning the corner as far as recession is concerned. But one factor that had contributed to some extant to the recession and financial crisis is the credit card debt in the USA. In terms of figures the credit cards in circulation are over 1.5 billion for a population of just over 300 million. This is a menacing ratio and translates to a credit card debt of over 600 billion. To this figure if we add the almost million bankruptcies in the United Sates than we can get an idea of how much the United States economy is affected.

America is presently the world’s largest economy though in the near future China may well over take it. But unlike in China in the United States 60 million households do not pay their outstanding balances in full. This are carried forward and classified as unsecured debt. This debt because of the low rate of clearance say 2-4% of the outstanding has resulted in a big economic problem resulting in a huge liability to a lot of people.

The reason for this debt is not hard to seek and has its genesis in the easy availability of credit and secondly the ease by which gambling on the net with credit cards can be affected. At a conservative estimate nearly 3 million Americans could be addicted to gambling. Bear in mind that the cumulative United states national debt is hovering around 5. 7 trillion. This is far exceeded by the total consumer debt of $6.5 trillion and one can imagine what this means. It really spells a very difficult financial situation bordering on a catastrophe.

The situation is compounded with an abysmally low saving rate of the American populace which presently is almost zero. In case one compares this with the saving rate in the eighties when it was around 8.5% then the magnitude of the problem can be understood.

The period of the late 90s of the last century saw immense prosperity for the people. But this was also the period when debt grew because of easy availability of credit. Thus In the period 1989-2001 the debt almost tripled from $ 238 billion to $692 billion. The savings rate declined and bankruptcies rose up by 125%

This massive credit card debt has had a negative effect on the economy. In addition mounting mortgage and consumer debt is crippling the budget of most households. Large bankruptcies have set in like Lehman brothers and GM. The deregulation of Banking has also taken its toll as the real cost of corporate credit (prime rate) has increased only marginally (2.5%-3.0%) yet the real cost of consumer credit card debt has doubled from less than 6% to over 11%. Revolving of credit card debt to the next cycle amounts to nearly $11,000 per household.

To sum up, as things stand the vast US economy may in the years to come buckle downwards if the credit card debt is not reined in.


Credit Card Facts
Tuesday, July 6th, 2010

The average consumer carries around $20,000 worth of credit card debt and pays close $400 a month on that credit card debt. The average interest rate on credit cards in the United States is 15% APR. So if you take the time to figure out the statistics you will find that over the life of your credit card debt you will end up paying back the credit card company $70,003.50 for the $20,000 you borrowed. It would also take you 175 months or 14.58 years to completely payoff your credit card debt.

If you choose to enter into a Debt Settlement program with $20,000 on average your total amount of debt would be reduced to $11,600 including the debt settlement company’s fees. You would end up saving a total of $50,003.50 in interest and a total of $8,400 in your principal balance. Making your grand total savings of $58,403.50! If you continue paying $400 per month in a debt settlement program you will be completely debt free in 33.14 months. Under 3 years!!

Interest rates

Interest rates vary widely. Some credit card loans are secured by real estate, and can be as low as 6 to 12% in the U.S. (2005). Typical credit cards have interest rates between 7 and 36% in the U.S., depending largely upon the bank’s risk evaluation methods and the borrower’s credit history. Brazil has much higher interest rates, about 50% over that of most developing countries, which average about 200% (Economist, May 2006). A Brazilian bank-issued Visa or Mastercard to a new account holder can have annual interest as high as 240% even though inflation seems under control at around 6% per annum (Economist, May 2006). Banco do Brasil offered its new checking account holders Visa and Mastercard credit accounts for 192% annual interest, with somewhat lower interest rates reserved for people with dependable income and assets (July 2005).[citation needed] These high-interest accounts typically offer very low credit limits (USD$40 to $400). They also often offer a grace period with no interest until the due date, which makes them more popular for use as liquidity accounts, which means that the majority of consumers use them only for convenience to make purchases within the monthly budget, and then (usually) pay them off in full each month.

Calculation of interest rates

Most U.S. credit cards are quoted in terms of nominal APR compounded daily, or sometimes (and especially formerly) monthly, which in either case is not the same as the effective annual rate (EAR). Despite the “annual” in APR, it is not necessarily a direct reference for the interest rate paid on a stable balance over one year. The more direct reference for the one-year rate of interest is EAR. The general conversion factor for APR to EAR is EAR=((1+APR/n)^n)-1, where n represents the number of compounding periods of the APR per EAR period. For a common credit card quoted at 12.99% APR compounded daily, the one year EAR is ((1+.1299/365)^365) -1, or 13.87%; and if it is compounded monthly, the one year EAR is ((1+.1299/12)^12) – 1 or 13.79. On an annual basis, the one-year EAR for compounding monthly is always less than the EAR for compounding daily. However, the relationship of the two in individual billing periods depends on the APR and the number of days in the billing period. For example, given 12 billing periods a year, 365 days, and an APR of 12.99%, if a billing period is 28 days then the rate charged by monthly compounding is greater than that charged by daily compounding [ .1299/12 is greater than ((1+.1299/365)^28)-1]. But for a billing period of 31 days, the order is reversed (.1299/12 is less than ((1+.1299/365)^31)). In general, credit cards available to middle-class cardholders that range in credit limit from $1,000 to $30,000 calculate the finance charge by methods that are exactly equal to compound interest compounded daily, although the interest is not posted to the account until the end of the billing cycle. A high U.S. APR of 29.99% carries an effective annual rate of 34.96% for daily compounding and 34.48% for monthly compounding, given a year with 12 billing periods and 365 days.

*Interest rate information from Wikipedia