The curse that is bankrupcy can be avoided

Your bills are adding up, and your creditors are calling you all through the day. The debts just seem to be overwhelming and you are at crossroads. At such times, bankrupcy seems to be the only way out. In fact, there are even commercials that try to convince you this is the way to go. Before you file your paperwork, take time and consider ways and means of avoiding bankrupcy. Bankrupcy is not some form of magical solution that will clear away all your problems. With a little diligence, you can avoid this nightmare called bankrupcy and save what is left of your credit history and probably your sanity.Debt

Why you need to avoid bankrupcy:

Anyone filling for insolvency must have suffered a big financial hit. Should you file, expect your credit score to plummet by about 250 points. In addition, you will have black mart that will taint your report for up to 10 years. This will affect every transaction you are involved in the near future. You will not be able to receive any credit but if you manage to secure a loan; you will have to bear high interest rates. Purchasing a home or a car will not be easy for you. There are debts that bankrupcy does not cover. For instance, overdue tax, child support or debts to government are not covered. The best ways to avoid bankrupcy is by consolidating all your debts into one.

Avoid bankrupcy:

Even though you may be feeling like you are at the end of the rope, there is a way out for you. You can take control over you debts by getting organized. Take everything which has your name on it and sort them out. Have a list of all your debtors and categorize them into subcategories. Once you prepare this list, you will have a better perspective of the situation. Consolidating all your debts is a possible way to avoid bankrupcy. There are people who have done this and so can you.

How to Avoid Repossession

There are many people whose properties that are at risk of being reposed. This is mostly due to some mistakes that may have made during repayment of loans and mortgages. In order to avoid repossession, there are a number of things that you may need to put in mind. However the most important thing you need to do is stay focused the most important aspects of repayment. This is especially true when you are struggling to make such repayments. Among the things that you may need to in order to avoid repossession include:

• You need to speak to your lender at the soonest time possible and inform them of your current situation. This way you will be in a better position renegotiate the terms of the loan be it a car loan or mortgage.

• You may consider asking your lender to grant you a temporary payment holiday or even assist you in capitalization of your arrears. You may also ask your lender to allow you pay off arrears in small installments.Debt

• You may have your lender extend the term of whichever property loan you have taken. This way you will be in a position to make payments over an extended period in turn reducing the amount you would need to pay on a monthly basis. However, this will increase the amount you would have to repay to the lender.

• You may alternatively use the property to make money in order to be able to repay the amount owed to your lender. This is a good way of avoiding repossession when you have difficulty in servicing your mortgage. However, you may need permission from the lender to do this. You can then use the proceeds that come from the property mostly in terms of rent to service your loan.

• In consultation with your lender you can go ahead and sell the property for you to be able to repay the loan. This way you will be able to avoid repossession especially if the property brings in the amount needed to service the loan.

How to Handle Collection Agencies

If you stop paying your bills or can’t pay your bills, chances are, you won’t get more than three months behind before your account is closed and the debt is sent to a collection agency. However, this is not a death sentence. There are many ways to deal with collection agencies so that the outcome is better than you could have hoped for.

1. Never talk to a collection agency on the phone. – Send a cease and desist letter requesting that the company stop contacting you by phone, then communicate only in writing. This way everything is documented.

2. Never claim the debt unless you are making payment arrangements. You don’t have to deny it either. In fact, the FDCPA says you aren’t required to tell a collection agency the truth about anything. Only make payment arrangements if you can afford the arrangement. Don’t let the collection agency bully you into a payment you can’t afford.

3. If you want to pay the debt, but can’t pay it all at once. What should you do? – You can negotiate with the collection agencies. They have purchased your debt for much less than the total amount or have been assigned your debt and will be paid a fee based on how much they are able to collect. You can negotiate your debt down to 40-60% of the balance and then negotiate monthly payments. You are in control in this situation. You have the money that they want. Use this to your advantage. Take your time negotiating. You do not need to hire a company to negotiate for you. In fact, most credit card companies and debt collectors will give you a better deal than they will give to a debt negotiation company. You won’t have to pay the debt plus the fees to the negotiation company. Credit card companies and debt collection companies much prefer to work with you personally.

4. Can you get a debt that have been sent to a collection agency sent somewhere else? – Yes, you can. Essentially, the collection agency is only offering you a service. You can decline. Send a letter to the collection agency stating that you decline their service and request that the debt be sent back to the original debtor. Chances are, it will get sent to another collection agency. Send the same letter. Eventually, it will just go away. It will probably remain on your credit report though. Wait until a year has passed then dispute the entry on your credit report.

5. The debt is yours, but you can’t or don’t want to pay it. What should you do? – It is possible to get out of this situation through debt validation. Send a request to the collection agency requesting that they validate your debt. You need to send this letter certified mail to document the date that the letter was sent and received. Once the letter is received, the collection account must be removed from your credit report and the collection agency has 30 days to validate your debt. The FDCPA outlines clear guidelines as to what constitutes validation. They must provide a complete account history, signature documents, or proof they they are legally allowed to collect from your original contract with the creditor. Any other response is not validation. Many companies will simply ignore the letter or send you back something that doesn’t meet the requirements of validation such as the amount of the debt, your social security number, or your address. It is also a good idea to find out the statute of limitations for your state and see if the debt is still even collectable.

6. The collection agency couldn’t validate. What happens now? Nothing should happen now. The entry must be removed from your credit report and the company is no longer allowed to pursue you for the debt. Any violation of that such as updating your credit report or making a phone call is a violation of the FDCPA and you can sue the company for $1000 for each violation. The debt may be sold to another collection agency, but one couldn’t validate, another one won’t be able to either.

7. If you weren’t contacted by a collection agency, you were contacted by a law firm, there is no difference. The law firms are simply collection agencies masquerading as law firms. They have to follow the same rules as other collection agencies.

 

Collection agencies always try to scare you or bully you into making payment. Their threats are just that, threats.  Take your time. Deal with them on your terms. You will be able to be more successful in your negotiations.

3 Tips for Successful Debt Management

Debt qualifies as anything you owe money on, whether it is a mortgage, a car, or last year’s summer vacation. Some may think that any kind of debt is bad debt. However, some debt actually qualifies as good debt. Bad debt is defined as owing money on loans you have taken out for things that are not necessary, such as that trip to the South Caribbean or that overpriced vehicle you simply could not live without. Good debt on the other hand, qualifies as loans you have taken out on items of necessity, such as medical bills or living expenses. Regardless of whether you have good debt or bad debt, learning about debt management and how to wisely handle your existing cash reserves and loan needs, is the first step to financial freedom and debt relief. Follow these 3 tips for better money and debt management:

–Borrow Selectively

Be selective about what you are borrowing for and how much. Borrow only the amount you think you can reasonably afford to pay back. When thinking of making a large purchase such as a vehicle or home, make certain to include any extra costs that you may not initially think of, such as maintenance, taxes, and insurance. By thinking ahead, you may avoid mountains of debt in the future.

–Use Credit Cards Wisely

This can be a bit tricky. It is easy to simply flip the card onto the counter without even thinking of the future consequences. Only use your credit cards for things you know you will reasonably be able to pay off. Try to pay your balance in full each month to avoid outrageous finance and interest charges. Creating debt on a credit card simply to pay off another debt is never a good idea.

–Make Regular Payments

Schedule regular payments to pay off your debts each month. You are much more likely to get the debts paid off in a timely manner if you have a specific amount you must meet each month than you will by simply paying whatever you happen to be able to afford at the time. Regular payments can also help increase credit ratings and save on interest charges.

What You Need to Consider Before Filing for Bankruptcy

People who need to eliminate their debt or legally negotiate their payment plans go through the judicial process of filing for bankruptcy. It is an option taken by many people who no longer have means to repay their debts and solve their financial problems. Even though filing for bankruptcy may be the best option for some, you must understand that it involves a lot of negative implications. The fact that you have filed for one will appear on your credit rating for a certain number of years and most lenders will know that some of your previous debts were probably unpaid. For this reason, any type of credit may no longer be available to you in the future.

If you still can, try to avoid filing for bankruptcy. It is not only a difficult process but it will also affect you for a long period of time. Debt counseling is something you can try to make your situation easier to handle. There are a lot of debt counselors you can look up online as well as in your local telephone book. Just like with bankruptcy experts online, you want to check their references before you pay them any money. You do not want to give someone money and not get anything in return especially now that you are already considering filing for bankruptcy.

Alternatively, you can try negotiating with your creditors yourself. You can call your debtors and let them know that you have means to settle your debt or make payment arrangements with them. Since their main goal is to receive the money you owe them, most will work with you even if it means getting less than they initially expected.

Everyone says that bankruptcy should be avoided at all costs. However, there are times when declaring bankruptcy is completely unavoidable. If you have no choice but to declare bankruptcy and the courts find that you are eligible, use it to your advantage. Although it will hurt your credit rating, there’s much you may have to gain.

If your debt has become so overwhelming that you find no other means for you to manage it, declaring bankruptcy can be a good option for you. Declaring bankruptcy may allow you to use all your assets and property to pay your creditors over a number of years, clear out your debt in a manner that is manageable to you, and then start fresh. It also affords you the opportunity to stop receiving hassling phone calls as well as visits from collection agencies and your creditors. After the entire process, you may be able to start anew with your finances.

After bankruptcy, you must keep yourself debt-free and find different ways to build your credit score back up. There may be a time when taking out a loan will be necessary and high interests are usually given to those who have declared bankruptcy. However, if you show that you have made much improvement on your financial condition and you have been able to manage your finances properly, that will reflect on your credit report. That will give you leverage to negotiate for lower interest rates even if you have previously declared bankruptcy.

 

What You Need to Know About Debt Consolidation: 3 Facts

Those debt consolidation offers can seem so tempting, with claims of low monthly payments, no more hassles from creditors and merging all your bills in into one simple payment. Debt consolidation seems like such an easy way to get out of debt, doesn’t it?

Unfortunately, the truth is far different than the commercials and advertisements would have you believe. Debt consolidation loans can be helpful, but you must be careful. These loans are not a panacea, and can prove to be more trouble than you might think. Debt consolidation loans are viable choices in some situations, but you need to know what you are getting yourself into. If you’re considering a debt consolidation loan, you need to understand the basic facts.

Fact 1: Debt consolidation is a loan to pay back other loans.

There are no free lunches out there. Debt consolidation is not a simple fix. Yes, you can eliminate a couple of bills and lower your monthly payments, but you can’t change the fact that you still owe money. A debt consolidation loan is simply a new loan you use to pay off the other ones. You’ll still have to pay back this new loan, even if it seems like a better deal.

Let’s look at it from the debt consolidation company’s point of view. They lend you money to pay back loans. You agree to pay back the money they lend you. At first, you pay them less than you would have paid if you’d kept the other loans. That means the debt consolidation company makes lees money, right? Wrong. While the monthly payments are less, there are more of them. Maybe a lot more. Over time, those smaller payments add up. You pay the debt consolidation company more money than you would have paid the other lenders. That’s how they make money.

Fact 2: Debt consolidation loans can be hard to get.

You know that debt consolidation offers are loans like any other kind of consumer credit. Like credit cards, mortgages or car loans, you have to be approved for these programs. Unfortunately, people who struggle to pay back their loans are usually the ones who look to debt consolidation as the answer. Because they’re having trouble making payments, their credit scores might not be very good. If you’re in a position where you think consolidating debts, think twice if you have a low credit score.

Even if you are able to get a consolidation loan, you’re not going to get very good terms. Having bad credit means you won’t be able to get anything other than the highest interest rates and terms. Your new debt consolidation loan can end up being a worse deal than what you had before.

Fact 3: Debt consolidation won’t get rid of debt.

Taking out a loan to pay back other loans can be beneficial in some situations. Unfortunately, it doesn’t address the main problem: paying your debt. Loan consolidation offers can give you some time to get your finances together or make it easier to keep track of your loans, but it can’t teach you how to become a better debtor.

To truly get control of your debt, you have to pay it back, and not just by making the minimum payments each month. Debt consolidation companies are counting on your inability to do this. That’s why they extend the loans for a longer time period. The longer the loan, the more interest gets charged and the more money you have to pay back.

Getting out of debt means paying your debts. Paying on time, paying more than the monthly minimum, and focusing on the high interest rate loans are all effective strategies. Incurring more debt can result in the exact opposite of your desires.