|
The 1990s saw a tremendous rise in personal bankruptcies. It should come as no surprise. The very beginning of 1990 brought a recession and an all time high for unemployment. Today, credit is far too easy to obtain, and nearly impossible to pay off. Teenagers going away to college are being bombarded with advertisements for credit cards, and people who are barely living from paycheck to paycheck are receiving "Pre-approved" credit cards with limits that often exceed their yearly income. It's no wonder the public is having a tough time paying bills. Many people do not rack up credit card debt with foolish purchases; many lose their jobs or have to care for a sick relative and use credit cards and cash advances from credit cards to pay for food, rent, and medications. It's a very sad state of affairs, and a very frustrating one when creditors call on the telephone at all hours of the day and night. Creditors will ask inappropriate questions, ask you to mail post-dated checks, berate and humiliate you--all with the notion that this dehumanizing treatment is going to get you to pay bills with money grown on trees.
When you are over your head in bills and can't seem to see the light at the end of the tunnel, you may consider bankruptcy. For some people, those who are tens of thousands of dollars in debt, and little to no income, bankruptcy may be the only option. However, the average person filing for bankruptcy is 25-30 thousand dollars in debt--mostly credit cards and other unsecured debts. There is a manageable way out. There are steps that you can take to avoid filing for straight out Bankruptcy, known as Chapter 7--even if you are already: behind on the bills, late, and have creditors calling around the clock. The first step that you need to take is to list all of you unsecured and secured debts. Unsecured debts are debts that you owe for which there is no collateral. Examples are credit cards, lines of credit, some car loans, personal loans, and judgments. Secured debts are those which are protected by a collateral. Sometimes this includes car loans, 2nd mortgages, loans secured with a car or other property, and so forth. The bankruptcy court can discharge most unsecured debt, but not student loans, child support, alimony, DWI fines, taxes, government fines and sometimes mortgages; but you will lose your house.
The first step is to contact all of the creditors that hold your unsecured debts.
With credit cards, you can ask for a reduction in the interest rate of the card. Some people are carrying $10,000 on cards with 19.99 interest. It would take 25 years to pay off that debt at that interest rate, and you'd be paying back close to $30,000. If you can reduce your interest rate by even 40%, you also reduce your monthly payment. Many credit card companies will work with you because they don't want you to file bankruptcy--which means that they will never see a nickel of your debt.
The second step is to look at your assets. Do you have anything that you can live without, right now? If you have a pension fund, you can look into borrowing money. Most plans will allow you to borrow up to 50%, with interest rates sometimes as low as 2.9%. Borrowing $7,000 from a pension may allow you to pay off the bulk of your bills; and your payment to the company holding your pension account will no doubt be only 1/4-1/3 of the former credit card bill.
Sell any valuables that you can live without. Big screen TVs, extra cars (learn to take the bus), place the clothes that you don't wear in a consignment shop, look into getting a second job. Try to bring in as much capital as you can, and make lump sum payments on the credit cards; this shows that you are making an effort. For institutions like student loans, ask the issuing agency for a hardship forbearance (this can be up to 3 years), or a deferment for unemployed if you have lost a job. This will also suspend your payments for time periods of up to 3 years, thus allowing you to use the would be student loan payment funds to pay off high interest credit cars or loans.
Look at you pile of secured debt; likely it would be small, since none of us would need loans and credit cards if we had the money in assets. If you have equity in your house, then those funds of equity can be seized if you have to sell the house or if it is foreclosed upon. Figure out if you can afford to carry a mortgage/ rent, car payment, and other unsecured responsibilities. If you can manage your unsecured debt and at the very least, 50% of your unsecured debt, you are an excellent candidate for Consumer Debt Consolidation programs.
Consumer Debt Consolidation programs are very different from banks that issue Consolidation loans in the fact that the former are non-profit organizations, and do not grant loans. The last thing you need is another loan. The Federal Government and the very creditors who are harassing you fund consumer Debt Consolidation companies. Creditors want their money anyway they can get it. When you call one of the Consumer Debt Consolidation agencies, you will be assigned a counselor. The counselor will review all of your bills and determine whether or not she/he can come up with a plausible plan to get you out of debt within the next 36 months. The counselor negotiates with your creditors for either a reduction of interest (sometimes as much as 50%) or a total elimination of interest. This means that no further interest can accrue, and if does, it does so at the negotiated rate. Once you are enrolled with a Consumer Debt agency, creditors are bound by law not to call you or send you letters. This is a relief for people who live their lives being afraid to answer the phone. Having that peace of mind is necessary to your well being.
Consumer Debt consolidations are lifesavers for most people, and they allow most consumers to avoid filing for bankruptcy. Once a negotiation is reached, you will pay the Consolidation Company an agreed monthly payment, and the counselor forwards the payments to your creditors. You cannot be late, or miss a payment. In the interim, although not required, you should cut up all of your credit cards so that you will not have opportunity to use them. We do live in an age where a credit card is a necessity to: write checks, purchase on line services, rent cars, secure utilities, and the occasional emergency. To counter these nuisances, you can get a low-cost secured credit card. A secured credit card works like a debit card. You deposit money in an account, and pay a yearly service fee. You can use the card for on-line purchases, pass checks, reserve a hotel room and so forth. You can't go in to debt because you can only spend what you put into the account.
Bankruptcy should be used only when your debt is so high that you can never possibly repay all of your debt and still eat. Remember bankruptcy stays on your credit report for 10 years (7 years is the minimum, however creditors have the say here, and they always opt for 10 years). While you may be able to get some forms of credit, expect to pay between 30 and 50% more in interest charges and fees than people who have never filed bankruptcy. It is legal in some areas, for specific employers to be decline employment due to an applicant's bankruptcy. You will have difficulty in having utilities turned on without having to leave at least a 6-month deposit. If you didn't have that sort of money before, you certainly won't now. Below are listed two Consumer Credit Consolidation agencies and two low cost secured credit cars.
www.consumercredit.com
www.help-consolidate-debt.com
First Merit Corp. 14.65 interest $100.00yearly fee
$300.00 minimum deposit
1-800-554-4362 Interest on deposit varies.
Orchard Bank 13.9% interest
$45.00 yearly fee
$200 minimum deposit on which you earn 2% interest on your deposit.
1-800-488-2720
|
| |
