"Deeply in
debt and worried
about survival,
Discover The Proven
Methods for Bad Credit Debt
Consolidation!"
Bad
credit debt
consolidation
programs work by
lumping together all
of your unsecured
debts into one lump
sum.
By working with
your creditors, a
debt consolidation
company helps to
reduce the interest
rate on your debts,
potentially saving
you hundreds or
thousands of dollars
on interest and
reducing the amount
of time needed to
get out of debt. Put
simply, instead of
having to pay the
interest on several
different monthly
payments, bad credit
debt
consolidation allows
you to make one
single monthly
payment that goes
towards repaying all
of your debts as you
work towards
regaining your
financial freedom.
So
if you are knee deep
in debt and have
less than perfect
credit, I urge you
to read on and learn
more about your
options for bad
credit debt
consolidation.
Fist
off you are not
alone. Many people
are facing a
financial crisis and
the numbers are
growing yearly.
Whether the crisis
is caused by
personal or family
illness, the loss of
a job, or
overspending, it can
seem overwhelming.
But often, it can be
overcome. Your
financial situation
doesn't have to go
from bad to worse.
If
you or someone you
know is in financial
hot water, consider
these options:
realistic budgeting,
credit counseling
from a reputable
organization, bad
credit debt
consolidation, or
bankruptcy. Debt
negotiation is yet
another option. How
do you know which
will work best for
you? It depends on
your level of debt,
your level of
discipline, and your
prospects for the
future.
Bad
Credit Debt
Consolidation Self-Help
Developing
a Budget:
Your first step
towards taking
control of your
financial situation
is to do a realistic
assessment of how
much money you take
in and how much
money you spend. Start by listing
your income from all
sources. Then, list
your
"fixed"
expenses those
that are the same
each month like
mortgage payments or
rent, car payments,
and insurance
premiums. Next, list
the expenses that
vary like
entertainment,
recreation, and
clothing. Writing
down all your
expenses, even those
that seem
insignificant, is a
helpful way to track
your spending
patterns, identify
necessary expenses,
and prioritize the
rest. The goal is to
make sure you can
make ends meet on
the basics: housing,
food, health care,
insurance, and
education.
Your
public library and
bookstores have information about
budgeting and money
management
techniques. In
addition, computer
software programs
like Quicken and Microsoftฎ Money
are available but
are a little pricey
and not all that
user friendly. Our free
budget calculator
offered by Mvelopes can give you a
good look at your
financial spending
habits and compares
you to the national
average. It's a
pretty cool tool! If
you want to avoid
the tedious task of
keeping records Mvelopes offers what we feel
is a superior system
for online personal
budgeting that
allows you to easily
mange your finances
and control your
spending. Take a
free tour of Mvelopes
by clicking
here.
Contacting
Your Creditors:
Contact your
creditors
immediately if
you're having
trouble making ends
meet. Tell them why
it's difficult for
you, and try to work
out a modified
payment plan that
reduces your
payments to a more
manageable level.
Don't wait until
your accounts have
been turned over to
a debt collector. At
that point, your
creditors have given
up on you.
Dealing
with Debt
Collectors:
The Fair Debt
Collection Practices
Act is the federal
law that dictates
how and when a debt
collector may
contact you. A debt
collector may not
call you before 8
a.m., after 9 p.m.,
or while you're at
work if the
collector knows that
your employer
doesn't approve of
the calls.
Collectors may not
harass you, lie, or
use unfair practices
when they try to
collect a debt. And
they must honor a
written request from
you to stop further
contact.
Managing
Your Auto and Home
Loans:
Your debts can be
unsecured or
secured. Secured
debts usually
are tied to an
asset, like your car
for a car loan, or
your house for a
mortgage. If you
stop making
payments, lenders
can repossess your
car or foreclose on
your house. Unsecured
debts are not
tied to any asset,
and include most
credit card debt,
bills for medical
care, signature
loans, and debts for
other types of
services.
Most
automobile financing
agreements allow a
creditor to
repossess your car
any time you're in
default. No notice
is required. If your
car is repossessed,
you may have to pay
the balance due on
the loan, as well as
towing and storage
costs, to get it
back. If you can't
do this, the
creditor may sell
the car. If you see
default approaching,
you may be better
off selling the car
yourself and paying
off the debt: You'll
avoid the added
costs of
repossession and a
negative entry on
your credit report.
If
you fall behind on
your mortgage,
contact your lender
immediately to avoid
foreclosure. Most
lenders are willing
to work with you if
they believe you're
acting in good faith
and the situation is
temporary. Some
lenders may reduce
or suspend your
payments for a short
time. When you
resume regular
payments, though,
you may have to pay
an additional amount
toward the past due
total. Other lenders
may agree to change
the terms of the
mortgage by
extending the
repayment period to
reduce the monthly
debt.
If
you and your lender
cannot work out a
plan, contact a
housing counseling
agency. Some
agencies limit their
counseling services
to homeowners with
FHA mortgages, but
many offer free help
to any homeowner
who's having trouble
making mortgage
payments. Call the
local office of the
Department of
Housing and Urban
Development or the
housing authority in
your state, city, or
county for help in
finding a legitimate
housing counseling
agency near you.
Bad
Credit Counseling
and Debt Management
Plans
Credit
Counseling:
If you're not
disciplined enough
to create a workable
budget and stick to
it, can't work out a
repayment plan with
your creditors, or
can't keep track of
mounting bills,
consider contacting
a credit counseling
organization. Many
credit counseling
organizations are
nonprofit and work
with you to solve
your financial
problems. But be
aware that, just
because an
organization says
it's
"nonprofit,"
there's no guarantee
that its services
are free,
affordable, or even
legitimate. In fact,
some credit
counseling
organizations charge
high fees, which may
be hidden, or urge
consumers to make
"voluntary"
contributions that
can cause more debt.
Most
credit counselors
offer services
through local
offices, the
Internet, or on the
telephone. If
possible, find an
organization that
offers in-person
counseling. Many
universities,
military bases,
credit unions,
housing authorities,
and branches of the
U.S. Cooperative
Extension Service
operate nonprofit
credit counseling
programs. Your
financial
institution, local
consumer protection
agency, and friends
and family also may
be good sources of
information and
referrals.
Reputable
credit counseling
organizations can
advise you on
managing your money
and debts, help you
develop a budget,
and offer free
educational
materials and
workshops. Their
counselors are
certified and
trained in the areas
of consumer credit,
money and debt
management, and
budgeting.
Counselors discuss
your entire
financial situation
with you, and help
you develop a
personalized plan to
solve your money
problems. An initial
counseling session
typically lasts an
hour, with an offer
of follow-up
sessions.
Debt
Management Plans:
If your financial
problems stem from
too much debt or
your inability to
repay your debts, a
credit counseling
agency may recommend
that you enroll in a
debt management plan
(DMP). A DMP alone
is not credit
counseling, and DMPs
are not for
everyone. You should
sign up for one of
these plans only
after a certified
credit counselor has
spent time
thoroughly reviewing
your financial
situation, and has
offered you
customized advice on
managing your money.
Even if a DMP is
appropriate for you,
a reputable credit
counseling
organization still
can help you create
a budget and teach
you money management
skills.
In
a DMP, you deposit
money each month
with the credit
counseling
organization, which
uses your deposits
to pay your
unsecured debts,
like your credit
card bills, student
loans, and medical
bills, according to
a payment schedule
the counselor
develops with you
and your creditors.
Your creditors may
agree to lower your
interest rates or
waive certain fees,
but check with all
your creditors to be
sure they offer the
concessions that a
bad credit
counseling
organization
describes to you. A
successful DMP
requires you to make
regular, timely
payments, and could
take 48 months or
more to complete.
Ask the credit
counselor to
estimate how long it
will take for you to
complete the plan.
You may have to
agree not to apply
for or use
any additional
credit while you're
participating in the
plan.
Protect
Yourself
Be wary of credit
counseling
organizations that:
- charge high
up-front or
monthly fees for
enrolling in
credit
counseling or a
DMP.
- pressure you
to make
"voluntary
contributions,"
another name for
fees.
- won't send you
free information
about the
services they
provide without
requiring you to
provide personal
financial
information,
such as credit
card account
numbers, and
balances.
- try to enroll
you in a DMP
without spending
time reviewing
your financial
situation.
- offer to
enroll you in a
DMP without
teaching you
budgeting and
money management
skills.
- demand that
you make
payments into a
DMP before your
creditors have
accepted you
into the
program.
Bad
Credit Debt
Consolidation
You
may be able to lower
your cost of credit
by consolidating
your debt through a
second mortgage or a
home equity line of
credit. Remember
that these loans
require you to put
up your home as
collateral. If you
can't make the
payments or if
your payments are
late you could
lose your home.
What's
more, the costs of
consolidation loans
can add up. In
addition to interest
on the loans, you
may have to pay
"points,"
with one point equal
to one percent of
the amount you
borrow. Still, these
loans may provide
certain tax
advantages that are
not available with
other kinds of
credit.
Bankruptcy
Personal
bankruptcy generally
is considered the
debt management
option of last
resort because the
results are
long-lasting and
far-reaching. A
bankruptcy stays on
your credit report
for 10 years, and
can make it
difficult to obtain
credit, buy a home,
get life insurance,
or sometimes get a
job. Still, it is a
legal procedure that
offers a fresh start
for people who can't
satisfy their debts.
People who follow
the bankruptcy rules
receive a discharge
a court order
that says they don't
have to repay
certain debts.
There
are two primary
types of personal
bankruptcy: Chapter
13 and Chapter 7.
Each must be filed
in federal
bankruptcy court.
The filing fees run
about $185 for
Chapter 13 and $200
for Chapter 7.
Attorney fees are
additional and can
vary.
Chapter
13 allows people
with a steady income
to keep property,
like a mortgaged
house or a car, that
they otherwise might
lose. In Chapter 13,
the court approves a
repayment plan that
allows you to use
your future income
to pay off a default
during a
three-to-five-year
period, rather than
surrender any
property. After you
have made all the
payments under the
plan, you receive a
discharge of your
debts.
Known
as straight
bankruptcy, Chapter
7 involves
liquidation of all
assets that are not
exempt. Exempt
property may include
automobiles,
work-related tools,
and basic household
furnishings. Some of
your property may be
sold by a
court-appointed
official a
trustee or
turned over to your
creditors. You can
receive a discharge
of your debts
through Chapter 7
only once every six
years.
Both
types of bankruptcy
may get rid of
unsecured debts and
stop foreclosures,
repossessions,
garnishments,
utility shut-offs,
and debt collection
activities. Both
also provide
exemptions that
allow people to keep
certain assets,
although exemption
amounts vary. Note
that personal
bankruptcy usually
does not erase child
support, alimony,
fines, taxes, and
some student loan
obligations. And
unless you have an
acceptable plan to
catch up on your
debt under Chapter
13, bankruptcy
usually does not
allow you to keep
property when your
creditor has an
unpaid mortgage or
lien on it.
Debt
Negotiation Programs
Debt
negotiation differs
greatly from credit
counseling and DMPs.
It can be very
risky, and have a
long term negative
impact on your
credit report and,
in turn, your
ability to get
credit. That's why
many states have
laws regulating debt
negotiation
companies and the
services they offer.
Contact your state
Attorney General for
more information.
The
Claims
Debt negotiation
firms may claim
they're nonprofit.
They also may claim
that they can
arrange for your
unsecured debt
typically credit
card debt to be
paid off for
anywhere from 10 to
50 percent of the
balance owed. For
example, if you owe
$10,000 on a credit
card, a debt
negotiation firm may
claim it can arrange
for you to pay it
off with a lesser
amount, say $4,000.
The
firms often pitch
their services as an
alternative to
bankruptcy. They may
claim that using
their services will
have little or no
negative impact on
your ability to get
credit in the
future, or that any
negative information
can be removed from
your credit report
when you complete
their debt
negotiation program.
The firms usually
tell you to stop
making payments to
your creditors, and
instead, send
payments to the debt
negotiation company.
The firm may promise
to hold your funds
in a special account
and pay your
creditors on your
behalf.
The
Truth
Just because a debt
negotiation company
describes itself as
a
"nonprofit"
organization,
there's no guarantee
that the services
they offer are
legitimate. There
also is no guarantee
that a creditor will
accept partial
payment of a
legitimate debt. In
fact, if you stop
making payments on a
credit card, late
fees and interest
usually are added to
the debt each month.
If you exceed your
credit limit,
additional fees and
charges also can be
added. This can
cause your original
debt to double or
triple. What's more,
most debt
negotiation
companies charge
consumers
substantial fees for
their services,
including a fee to
establish the
account with the
debt negotiator, a
monthly service fee,
and a final fee of a
percentage of the
money you've
supposedly saved.
While
creditors have no
obligation to agree
to negotiate the
amount a consumer
owes, they have a
legal obligation to
provide accurate
information to the
credit reporting
agencies, including
your failure to make
monthly payments.
That can result in a
negative entry on
your credit report.
And in certain
situations,
creditors may have
the right to sue you
to recover the money
you owe. In some
instances, when
creditors win a
lawsuit, they have
the right to garnish
your wages or put a
lien on your home.
Finally, the
Internal Revenue
Service may consider
any amount of
forgiven debt to be
taxable income.
Bad
Credit Debt
Consolidation to
Home
|
