With the new bankruptcy laws, no mater if you are thinking of filing Chapter 7 or Chapter 13 bankruptcy, you are required to attend credit counseling. This must be done before you file, and must be done before a court approved credit counseling center. You need to submit a certificate or in some cases, repayment plans to the courts, as proof that you have met the requirements under the new bankruptcy law.  After filing bankruptcy, you will then be required to submit another certificate showing that you have attended another credit counseling course, learning to manage your personal finances. 

New Bankruptcy Law – Chapter 7 Filings:  The requirements for filing a Chapter 7 bankruptcy have also changed. Now, due to the changes in the laws, you have to prove your income. If you have a higher income than stated by the median income within your state, you will likely have to file a Chapter 13 bankruptcy instead of a Chapter 7.  With chapter 7 the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds to pay the creditors. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets. Potential debtors should realize that the filing chapter 7 may result in the loss of property. 

Bankruptcy Law – Chapter 13:   With the new bill and filing chapter 13 your “reasonable living standards” is no longer determined by a judge on a case by case basis, there is now a National Standard determined by the IRS for all debtors. You will also be required to take what is called a means test. This is used to determine rather you are capable of making repayments under a Chapter 13 repayment plan bankruptcy So basically you are now on a long payment plan paying back all your debt. A lot more than what you would be paying if you chose another form of debt relief If your thinking of filing chapter 13 or chapter 7 you can pretty much say good bye to cable TV, cell phones, movies, or anything else that are not with in “reasonable living standard”. 

The tough new bankruptcy law will have Americans do away with the court systems of filing bankruptcy and turn to settling their debt. Banks started settling for less then the original balances because it is beneficial to them for the following reasons.  1.) Lump-sum of 30-50% today is far better than the same amount collected over 3 to 5 years. 2.) Under Chapter 13, it will take the creditors 3 to 5 years to recover that 30-50%. 

It is important to understand the new bankruptcy laws and how they would affect you before you even think about filing bankruptcy in any state. Make sure you do your research and know what is best for you before you decide on how to eliminate your debt. 

Note: This is not to be considered legal advice of any kind. If you are interested in filing bankruptcy, you should consult with a licensed attorney in your state.

As many people already know, Debt settlement can be a great alternative to filing bankruptcy. In fact, debt settlement can actually serve as a better solution for people that may be struggling to even pay the lower monthly payments offered by a debt consolidation program. However, generally, debt settlement is a program that is better suited for people who have already begun to miss payments or will soon begin to fall behind due to its aggressive nature.

 Misunderstandings about damage to credit from Debt Settlement

The ability to make or miss monthly credit card payments should not be dictated by the enrollment of a debt settlement program, but rather by the consumer and their financial situation. For example, if you are unable to make payments to a creditor, due to a loss of income, and suffer damage to credit as a result, this would happen  weather you were in a Debt Settlement program or not. Unfortunately, many people think involvement in a Debt Settlement program is what causes damage to credit; however, damage to a credit rating occurs when you misses, or are late, on monthly payments. Anything other than making at least minimum monthly payments can negatively impact your credit rating. Please keep in mind that the purpose of this blog is not to assist you with the modification, improvement or correction of credit entries, credit scores or credit reports and it is true that while in a Debt Settlement program, you may have a negative impact to your credit score. 

Making monthly credit card payments or going with Debt Settlement 

Let me clarify what is meant by making minimum payments. This means that you have the financial means to make such payments while still meeting all other obligations you owe and still putting aside funds for savings. Borrowing from Peter, to pay Paul, is no way to get out of debt. This is why Debt Settlement is better suited for those that have already fallen or will soon fall behind. But in no way should a debt settlement company ever instruct you to stop making payments to your creditors. If you have the ability to make your monthly payments, you should do so. 

Working with a Debt Settlement Company 

Typically when someone joins a debt settlement company to achieve debt relief, the debt settlement company will work with clients’ creditors to find a viable debt reduction plan that is acceptable with both the client and creditors. In many cases, clients will find that their debts have been cut in half or more, but this is not always the case and depends on certain factors involving such things as time in the program, ability to save funds, the creditor that is owed and many others. When the program works as planned, which is usually the case when dealing with a reputable and solid company, a client can expect to save a reasonable about off the current balance owed. However, keep in mind that interest and late fees will continue while in a debt settlement program, so the balances will go up until a debt settlement is reached, but this is the case if you were not in a debt settlement program as well.

Debt settlement is a hardship based program and is not for people that can make all their monthly payments and have money to spare. Debt settlement is for those people that just can’t make the payments any longer. With that being said, if you can not make payments to your creditors, damage to credit will happen with or without debt settlement. Simply being in a debt settlement program does not damage credit. In fact, typically, when someone is in a debt settlement program, they have already fallen behind on bills prior to enrollment and have damaged credit anyway. Therefore, any damage that may occur most likely would happen prior to being involved in debt settlement program. Additionally, to say that debt settlement damages credit, you have to assume that everyone’s credit is in good standing when starting a debt settlement program and that is, more often than not, just not true. Typically, people that need debt settlement are already struggling with bills and falling behind which would directly impact a credit rating. 

Credit scores have always fascinated me with regard to getting out of debt. It is this cosmic number to which most believe it is the mark as to say and tell what kind of human they are. Most believe in this number, but they really have no clue how it is derived and or calculated. There is not much information readily available to the average person to find out how, on a daily basis, their credit score is calculated; however, most are terrified to do anything to effect their score negatively.

When do you need credit, when you want to borrow money? When is it necessary to borrow money, when you do not have enough to purchase what you either want or need, not when you are looking into debt settlement or trying to get out of debt! I believe the majority of time it is our wants that dictate our need and desire for good credit, not always our needs. For me personally the two major needs that require credit are transportation and housing. Most people live and work miles away, therefore a vehicle is a need. Unless you decide to drive a base model KIA, you will spend more than $10,000 on a new car. If you have cash available and do not have a problem with vanity and status pay cash for a good used car and be done with it. Paying cash does not require a credit score and keeps the monthly car payment off your budget sheet. 

A home is a need. Whether you live in an apartment, condo or home, a credit score will be used to provide a shelter. An apartment will look for delinquency on other apartments and or major purchases. If you are looking to buy a home or condo your credit score will reflect what interest rate you will have and or what down payment will be needed to fit the mortgage into your budget. The lower your score the higher interest rate you will pay. 

One of my biggest obstacles being in the Debt Settlement industry is people who claim they do not want to ruin their credit. The initial shock to me is that they truly believe that having 8 credit cards and thousands of dollars in debt is actually helping their credit score. This is a big misconception. The initial concept of credit rating was to reward those who borrowed and paid the debt of in full, not over 20 years. 

This article is for those individuals who find themselves buried in debt, just paying the minimums every month and who do not see their debt decreasing and or their credit rating increasing. Another fascinating concept to me is how few people know what their credit score is. If I polled ten random people on the street I would bet maybe 3 out of the 10 actually knew what their credit score was, and they more than likely know only because they recently purchased a large item and needed it.

I speak with people every day that have $30,000 to $50,000 in credit card debt and need help. When I explain debt settlement or credit counseling to them they shriek at the thought of their credit score being affected during the process of getting out of debt. They fight and justify how keeping their credit score where it is will be more beneficial to them than getting out of debt. 

When you do the math it is staggering the place we find ourselves when we have credit card debt and our budget only allows for the minimum payments to be made. Granted this is a trap the majority of us put ourselves into. Let’s split the middle and look at someone who owes $40,000 in credit card debt. Mathematically it does not look good. If you have $40,000 in credit card debt and are just paying the minimums and your average interest rate is 20% this is how the math works. 

Yearly minimum cost: $9600 

Yearly average reduction: $1596 ($8004 paid to interest)  

Years to pay it off: 25 

Total average cost: $240,000 

It is a sobering thought to realize that buying $40,000 worth of items on a credit card will eventually cost me $240,000 and take 25 years to pay off if I only can afford the minimum amounts. A large portion of Americans find them selves in this situation, yet when confronted with an option to get out of debt do not pursue on the grounds of any affect on their credit score. These individuals are convinced that their credit score is an invaluable item and need to survive that they are willing to pay six times what they owe and spend a third of their life paying for it. The hard reality is that over the twenty-five years and $240,000 worth of debt their credit score may go down anyway or if it increases will not increase extensively unless large purchase are made and paid in full immediately.

 If you find yourself believing that credit score is important than you are correct, but what is more important than credit score and will serve a greater purpose throughout your entire life is having no or minimal debt. Credit score can always be recouped in a short amount of time, but being debt free and or having savings and retirement is truly worth its weight. 

Don’t let the credit rating system keep you from becoming debt free. It may take you three to five years to go through a settlement or counseling program to get out of debt and your credit score will be affected, but the alternative is a financial prison sentence and by serving it you are not helping your credit score you are just maintaining a debt score. Please take time to educate yourself on the alternatives to bankruptcy and how the credit system really works and the ability for credit repair companies to restore your credit score after you have eliminated your debt. 

 http://www.debtregret.com

 Some content provided by Todd Hutchinson 

Note: Nothing in this blog entry should be considered credit repair advice. If you need credit repair, please contact a licensed credit repair company for assistance.

This survey was conducted from customers who chose the path of Debt Settlement. 

When asked the following questions these were the responses. 

How would you describe your overall experience? 

32% Excellent, 48% Good, 15% Fair, 5% Poor

How happy are you with the settlements you received and the amount you saved?

 46%Excellent, 39%Good, 11% Fair, 5% Poor 

How well did customer service answer your questions?

55%Excellent, 32%Good, 8%Fair, 4% Poor 

How well did the settlement advisor negotiate on your account?

53% Excellent, 35%Good, 9% Fair, 3% Poor

How well did the debt settlement program meet your expectations?

42% Excellent, 39%Good, 14% Fair, 5%Poor 

Are you happy you chose Debt Settlement? 

90% Said YES. 10% Said NO. 

51% of clients saved between $10,000 and $40.000 on the original amount of debt owed. 

47% were able to complete the program and become debt free with in 13 to 24 months. 

91% of clients said that they would recommend a Debt Settlement program to their family and friends. 

This was a survey conducted from a group of people who successfully completed a Debt Settlement program; however, the company names were not included. Regardless, the information provided could prove valuable when choosing your path to debt relief.

1.)    Do you charge everyday purchases instead of paying with cash or using your debit card?    

Tip: Try paying for purchases under $50 with your cash on hand or your debit card to avoid debt problems. 

2.)    Do you wait until the end of the month when you get your credit card bill to see how much you charged?     

Tip: Track you credit card purchases in your check book with a different color pen and add them in when you balance your check book.    

 3.)    Do you charge more than you can pay for when your bill comes? If so, you may have debt problems. 

Tip: By tracking your credit card purchases in your check book you will know what funds you have in your account, so that you can pay off your credit card bill rather than just making the minimum payments.    

 4.)    Do you frequently miss your monthly payments?    

 Tip: Make a payment schedule for every month and keep it on your refrigerator or on your bathroom mirror, so you can remember to pay your bills on specified days of the month. This way, you don’t miss payments and rack up late fees and finance charges. This can help avoid enlarged bills and other debt related problems.   

5.)    Are you falling into debt and not doing anything about it? Are you no longer able to make even the minimum payments?     

Tip: Do not just sit back and let your debts just build up? If so, your debt problems will not just go away. Research your options, debt settlement is something many people tend to turn to when they have found themselves in a financial bind and are unable to make their monthly financial obligations. With debt settlement, typically, you pay a good percentage less than what you have accumulated in debt. 

If you answered yes to any of these questions and you find yourself unable to make your minimum monthly payments, consider your options and avoid further debt problems by seeking help and consulting with a professional. Maybe you will find that debt settlement is best for you. good luck in resolving your debt related problems.

Unfortunately, with today’s failing economy, many Americans are asking this very question. In order to help answer this question, consider the following statements and see if any sound familiar. If so, you may need credit card debt relief. 

You have no idea how much you owe.

You have more than three major credit cards. 

You lie about spending or hide credit card statements from family members.

 You’re at or near your credit limit on your credit cards. 

You write checks hoping a deposit posts before they clear. 

You take out cash advances on your credit card to pay other bills. 

You’ve been denied credit. 

You don’t have any savings. 

You make minimum payments on your credit cards. 

You get calls from debt collectors. 

You’re afraid to look at your statements each month. 

You have no idea how much you owe. 

You have more than three major credit cards. 

Minimum Payments for Debt Relief 

Strangely enough, many people feel that they are ok if they are only making the minimum payments on credit cards and that this, in some crazy way, is actually a form of credit card debt relief. The minimum amount is only your interest, so if you only pay that, you’re never going to see any debt relief; in fact, things will most likely get worse! If possible, it is best to pay off your credit balance monthly. By doing this, you are able to avoid the high interest that makes it so hard to pay anything other than the minimums.

 Balance Transfers for Debt Relief, 

Try and stay away from credit card balance transfers when searching for debt relief. Borrowing from Peter, to pay Paul, is no way to get out of debt. This type of solution can actually worsen your situation. In order for a balance transfer to actually work, you must properly understand all the hidden and disclosed charges associated with it. By this, I mean that if the credit card balance transfer is going to involve numerous charges and fees that outweigh the reason for the loan itself, debt relief, then you may be better off finding another debt relief option. If you do find a viable balance transfer option, then it is important to properly budget, so that you can ensure the loan is paid back under the terms of the agreement. 

Home Equity for Debt Relief 

If at all possible, stay away from home equity loans as a form of debt relief as well. While the interest rate you pay may be reduced, it is paid out over a longer period of time, costing you more, and must be secured with something of value such as a home. When converting an unsecured debt to a secured one, with home equity,you could lose your home if something happens that causes you to miss payments.

 Debt Settlement for Debt Relief

In my opinion, a better option for debt relief is the Debt Settlement route. Debt Settlement involves negotiating with credit card companies to lower the amount of debt that you actually owe.  Please keep in mind that Debt Settlement is a very aggressive form of credit card debt relief and, depending on your score when you enroll, can negatively impact a credit rating. Debt Settlement is not for everyone, but it can be an effective for of debt relief when used under the proper circumstances and done through a reputable company. Typically, consumers are able to reduce the amount they owe by up to 50 percent and see real debt relief in as little as 12 to 36 months.  Debt Settlement may be an effective debt relief solution for consumers who owe a lot of money on credit cards and are barely able to afford their minimum monthly payment or have already fallen behind.

 Credit Counseling for Debt Relief

Others may wish to seek the assistance of Credit counselors when seeking debt relief. Credit counseling involves working with your credit card companies to lower interest rates and late fees to make your minimum monthly payments more manageable. With consumer credit counseling, a consumer will usually see debt relief in 4 to 5 years and may be able to save money on the high interest charges. However, it is devastating to credit depending on how your score is upon enrolling. Nevertheless, it may be an appropriate form of debt relief for people that are paying more than the minimums on their credit cards, but are still suffering from high interest rates. 

Bankruptcy for Debt Relief

For many people in search debt relief, bankruptcy is also available option.  While I’m not an attorney, and cannot provide legal advice, in my opinion, bankruptcy should only be considered as a last resort due to the severe credit implications. That being said, for consumers who owe a significant amount on credit cards and do not have adequate income to ever repay their obligations, then bankruptcy may be a suitable debt relief option. For example, in a Chapter 7 bankruptcy, you are able to liquidate non-exempt assets of value; money made from the liquidation is used to partially repay your creditor. For consumers who do not have any assets of value, typically, they do not have pay back the credit card companies anything. If you happen fall under this category, Chapter 7 bankruptcy is the fastest and most effective form of credit card debt relief and you should consult with a bankruptcy attorney to discuss your options. 

Good luck and best wishes in finding the right debt relief solution for you.

With how the economy is today, carrying some debt is almost a certainty. Between mortgages, car payments and credit cards, many Americans find themselves creating a snow ball effect, by rolling balance on to balance, borrowing from Peter to pay Paul, making it seem almost impossible to get out of debt!

Assessing Your Debt – Signs That You’re In Over Your Head 

How do you know when you need help getting out of debt? The  figure varies from person to person, but, in general, if more than 20% of your take-home pay goes to finance non-housing debt or if your rent or mortgage payments exceed 30% of your monthly take-home pay, you may be falling too far into debt and overextending yourself. Other signs of overextension include not knowing how much you owe, constantly paying the minimum balance due on credit cards (or worse, being unable to even make the minimum payments), and borrowing from one lender to pay another. (Rolling debt on to debt). If you find that you’re falling too far into debt, don’t panic. There is a light at the end of the tunnel. There are a number of steps you can follow to eliminate that debt and get back on your feet. Working your way out of debt will, of course, require you to adjust your spending habits and come up with a budget plan.

 Begin With a Budget – Where Does All My Money Go? 

The first step in getting out of debt is to figure out where your money goes. This will enable you to see where your debt is coming from and, perhaps, help you to free up money for you to apply to paying off your debt. Track your expenses for a month by keeping ALL receipts on EVERYTHING you spend money on or keep track by writing down everything you purchase. At the end of the month, total up your expenses and break them down into what is  essential, including fixed expenses such as mortgage/rent, food and utilities and what  nonessential, including entertainment , eating out, all the other stuff that you don’t absolutely need. Then you can see what you have to work with and if you can spear a few things.

 Try things like 

•          Bringing you lunch to work instead of eating out.

•          Carpooling to work our use the advantages of public transportation.

•          Turning off lights and using sunlight.

•          Making fewer long-distance calls.

•          Turning the thermostat down a few degrees in winter.

 Do your best to reduce your spending.

Little things like this can make a difference when  getting out of debt. Adjusting your living/spending habits will help you free up extra money to pay off your debt and help manage you financials in the future, so that falling into too much in to debt is no longer an issue.  

Finding your best debt solution – What do I do now?

Research research research…… 

Once you’ve got your budget settled, you can begin researching the best solution for you to get out of debt. Make sure to educate your self on every option possible. Not every debt solution is for everyone, People fall into debt for different reasons and because of this there are different was to get out of debt. Finding the best debt solution can be stress full, but not as stress full as deciding on the wrong one for you. Here are some links to get you started on researching your options. Remember to educate you self on every detail before you decide which route to take. 

http://www.tascsite.org

http://www.debtregret.com

http://www.bankruptcy-america.com

So try to set aside 30 minutes during the next week to: 

•         Figure out ways you can spend less and save more.

•         Make a list of unnecessary purchases you could eliminate each month.

•         Create or update your budget.

•         Research and educate your self on all your options before deciding what the best debt solution is for you.

Good luck in your efforts to get out of debt and keep up the good work.