Debt Consolidation and Management Guide

Filing for bankruptcy is an option sought by many people each year.  However, since the bankruptcy law was amended in 2005, additional procedures have made filing for bankruptcy and getting approved for bankruptcy more difficult than ever.

If you’re currently experiencing serious debt problems and is contemplating about bankruptcy, the question is, is it really the right time for you to file for bankruptcy?  Here are some pointers you should know about bankruptcy filing.

Should I File for Bankruptcy?

Have you considered other options apart from bankruptcy?  Your debt situation may not be as bad as you think and if you seek the proper help, you may be surprised to find that there are better alternatives to the problem.  Under the new bankruptcy law, consumers should first complete a credit counseling course six months before filing.

The government has assigned accredited credit counseling agencies that consumers can run to for their debt issues.  Upon completing the counseling, if filing for bankruptcy is recommended, then that’s the time you should start preparing your bankruptcy documents.  Otherwise, you would be advised to take on other possible debt solutions.

Filing for Bankruptcy

Unlike the past years, consumers were able to file their own bankruptcy applications.  Today, the government requires bankruptcy applicants to prepare their documents with the assistance of a professional bankruptcy attorney. 

Your bankruptcy attorney must ensure that all details and information that will be entered to your application are true and correct.  Any false information provided is a federal offense so you need to be very careful on filling up your bankruptcy forms.

The Qualification Income Means Test

After filing your bankruptcy application, what’s next?  Applicants used to have the option to choose on which Chapter of bankruptcy to request.  Today however, an applicant will need to undergo a Qualification Means Test to determine whether his monthly income will qualify him for a complete release from his creditors or not.

Chapter 7 bankruptcy is what most applicants prefer because this type of bankruptcy completely releases them from all debts from their creditors.  Nevertheless, if an individual fails on the means test calculation, he will be subjected to a Chapter 13 bankruptcy.  This chapter requires an individual to submit to a repayment program that will be set by the bankruptcy State court.  This means, a percentage of money will be automatically deducted from his income each month as repayment for his debts.

The Consequences of Bankruptcy

Don’t forget to consider the consequences involved in bankruptcy.  For the next seven years, your record of bankruptcy will be reflected in your credit report.  This can place a stigma to your credibility when you apply for a job, look for places to rent, or apply for loans or insurance policies. 

Therefore, seek bankruptcy only as a last resort to your debt problems and strive to work on other solutions to get out of debt.  Better yet, avoid getting stuck in serious debt situations by keeping control of your spending and keeping up with your debts.

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General Motors Corp. on Monday unveiled a plan to swap its debt for common stock — a move that could potentially help the storied U.S. automaker stave off a bankruptcy filing by significantly alleviating its debt burden.

GM currently has about $27 billion in unsecured debt. If the company wants to avoid bankruptcy, it needs to retire most of that debt while simultaneously exchanging half of the loan it received from the government for stock as well. Further, GM is asking the United Auto Workers union to accept stock for at least half of the $20 billion the company must pay into a retiree fund beginning next year.

Those moves could provide enough leeway for GM to avoid bankruptcy and continue to revamp its operations to remain solvent.

How exactly will the proposed exchange of debt for stock work, and is it likely to be successful? Here are some questions and answers.

Q: What’s involved in the debt-for-equity swap?

A: General Motors is offering to give investors common stock in its company in exchange for unsecured debt the investors currently hold.

Unsecured debt is essentially a loan or bond that must be repaid with interest, but that is not backed by any assets, meaning that those who hold it are at risk of losing their entire investment if a company fails and is unable to pay back the loan. There is no asset for an investor to claim ownership of when unsecured debt fails to be repaid, in contrast to, say, a mortgage, where the bank gets the house in the event of a default.

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To say that personal bankruptcy is a prevalent case is an understatement.  Statistics show that in the United States alone, about 1.2 million citizens filed for bankruptcy in the year 1996.  This number is expected to rise continuously not only in the US but also in Australia, Canada and European countries as well.

Studies revealed that not all individuals who have filed for bankruptcy were completely incapable of repaying their debts.  In fact, a large percentage of bankruptcy applicants sought bankruptcy just to get a fresh start.  Thus, the increasing rate of bankruptcy cases is due to the fact that most consumers choose this option just to escape from their obligations to their creditors.

In some cases, people who have never expected to experience bankruptcy were taken by surprise.  Certainly, there were warning signs that should have alerted them that they were heading for bankruptcy.  But sadly, most of them chose to neglect these signs.  What are the different factors that lead to personal bankruptcy?  Below are the most possible reasons that can put anyone in a bankruptcy situation:

Uncontrolled use of credit cards.  Credit cards are seen as a major culprit that can lead people to bankruptcy before they even realize that there’s a problem.  The ease and convenience of using credit cards in purchasing almost anything in the market makes them a number one cause of debt.  Ask yourself the following questions:

• Have you stopped to check on your spending habits lately? 
• Do you take your credit card payment dues for granted? 
• Do you tend to delay on your credit card payment? 
• Do you only pay the minimum amount on your credit card bill?
  Do you usually carry over a balance?
• Do you maximize the use of your credit line?
• Have you been relentlessly charging all your purchases to your credit card without considering the consequences? 

Gambling and substance addiction.  Gambling and substance addiction are like thieves that can steal a person’s ability to think straight.  Experiences prove that about 1.5 million people filed for bankruptcy as a result of losses from gambling.  Unfortunately, victims of gambling and other forms of addiction do not realize the problem until the problem has gone worst.  But along with financial problems, these factors also bring emotional pain and distress.

High credit card interest rates.  Credit cards with variable or adjustable interest rates often start with attractively low cost but balloons up in the middle of the term.  Have you checked the interest rates on your credit card or your mortgage?  Take note that a variable rate is dependent on the Prime Rate in the market.  As the Prime Rate increases, so will the interest rate on your credit card and mortgage. 

With this in mind, it is recommended to choose a credit card or a loan with a reasonable fixed rate of interest.  This way, you’ll know exactly how much your monthly payment would cost you from the start until the completion of your repayment term.

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As the dust settles following Oracle Corp.’s announced $7.4 billion acquisition of Sun Microsystems Inc. Monday, the combined company is expected to become the top enterprise identity management vendor, leading to a potentially painful transition for customers.

It was widely thought that an acquisition by IBM would end Sun’s months-long search for a buyer. Oracle, however, surprised the industry by agreeing to pay $9.50 per share for the struggling vendor, known for its Solaris-based servers and Java-based software. The total value of the deal is approximately $5.6 billion when considering Sun’s cash and debt.

Oracle expects to turn a quick profit from the acquisition. Oracle President Safra Catz said in a statement that the deal would be "more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined."

Leadership in identity management tools and services
The combined company will be a force to be reckoned with when it comes to identity management. Scott Crawford, research director of security and risk management with Boulder, Colo.-based research firm Enterprise Management Associates Inc., said the deal "brings together two leaders in identity management, but with that leadership comes substantial overlap."

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Today, more and more lending companies offer financial assistance for a wide variety of purposes.  For people with debt problems, an unsecured debt consolidation loan is an option.  How does this type of loan work and what advantages does it offer?  How can you make debt consolidation work?

How Unsecured Debt Consolidation Works

If you owe multiple creditors, one way to save from the hassle of juggling between due dates is to consolidate.  By combining all your existing debts into one account, you only have to pay one creditor- that is your debt consolidation company.  There is also no need to get charged with varying interest rates.  Through debt consolidation, all your combined debts would only have a single and lower interest.

Most debt consolidation loans are secured by collateral.  However, there are also lenders that offer unsecured loans which do not require any form of collateral.  Nevertheless, lending companies often require applicants to have good to excellent credit history in order to get approved. 

Due to the greater risk involved with an unsecured loan, they also come with higher interest rates than secured loans.   Still, despite the higher fees, many people opt for an unsecured debt consolidation because they don’t want to risk their properties.

Unsecured Debt Consolidation – Is it the Solution to Your Problem?

Is an unsecured debt consolidation the solution to your problem?  That depends on the exact situation you’re in.  Before deciding to take out a loan, explore all possible options that you can do to resolve or cut down your debts.  For instance, have you taken the necessary steps to cut down your expenses?  Would it be possible to borrow from a relative or a friend instead?  Can you get a second job to help you pay the bills?

Have you talked to your creditors to negotiate about your debts?  Never underestimate the power of negotiation.  Talking with your creditors can enable you to lower your debts.  If you explain your situation and show your willingness to make repayments, most creditors would be willing to make some adjustments or modifications on your repayment terms or waive the unnecessary fees to help you.

Finally, if you’ve decided to opt for an unsecured debt consolidation loan, find a company that offers the most reasonable deal and make sure that you have prepared a practical repayment plan to guide you.  Remember that consolidation is only the first step.  See to it that you can keep up with your monthly payments until the completion of your loan’s term. 

Avoid incurring new debts especially while in the middle of your debt consolidation repayment.  Pay close attention to your spending habits and lifestyle.  If you had to resort to consolidation to solve your debt problems, that’s a clear sign that some changes may be needed with regards to your spending.  Indeed, debt consolidation can be a great help but if you really want to make it work, you need to be willing to exert your own effort as well.

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RALEIGH, N.C. – The number of U.S. businesses and individuals declaring bankruptcy is rising with a vengeance amid the recession, despite a three-year-old federal law that made it much tougher for Americans to escape their debts, an Associated Press analysis found.

"There’s no end in sight," said bankruptcy lawyer Bryan Elliott of Hickory, N.C., who is working seven days a week and scheduling prospective clients a month in advance. "To be doing this well and having this much business, it is depressing. It’s not a laugh-a-minute job."

Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records collected and analyzed by the AP. Last month, 130,831 sought bankruptcy protection — an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.

Bob Lawless, a professor at the University of Illinois College of Law, said bankruptcies could reach 1.5 million this year and level off at 1.6 million next year — around the same time economists expect an economic recovery to begin.

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Are you stuck in bad debt and is eager for a solution?  Being in debt doesn’t need to be a helpless situation.  Let’s take a look at some of the best ways you can consider to be set free from debt.

1.  Pay more than your credit card’s minimum due.  Some credit cards offer as low as 2% of minimum due.  However, if you only pay 2% of your outstanding balance each month, it will take you a longer time to get off from debts.  Prolonging your credit card balances means paying more from your interest rate charges.  Furthermore, it puts a greater risk of exceeding your credit limit and accumulating debts.

To manage credit card debt more effectively, it’s best to pay off your balances in full each month.  If it’s not possible, pay off as much as you can so you can to complete your payments at the quickest possible time.  Paying off more than your credit card’s minimum due could mean giving up some of your luxuries or personal expenses.  Still, making your credit card debts your priority is definitely worth it.

2. Pay off high-rate credit cards first.  If you own multiple credit cards with existing balances on each, try to pay off your highest rate card first and work your way down.  Or you can also consolidate your debts by applying for a 0% APR balance transfer card.  BY transferring over your balances, you can save a great deal from not paying off the additional interest.

3. Consider borrowing from family or friends.  Borrowing money from family or friends could mean borrowing with no interest.  If you have past due bills, you may consider borrowing your payment so you can avoid the interest rates and late penalty charges.  Remember, if a family member or friend is willing to lend you money, it is best to put everything into writing to protect your relationship

4.  Negotiate with your creditors.  If you’re really having difficulty in keeping up with your monthly payments, negotiating with your creditors is worth the try.  Meet with your creditor and explain your current financial situation.  You need to be honest and let your creditor know the circumstances why you’ve been late with your payments.  Request for modification of your repayment terms so that paying off your debts will not be a burden. 

Although, not all creditors may agree with your request, there are creditors who are willing to extend consideration especially if you show them your sincerity and willingness to stay true to your payment responsibilities.  In fact, most creditors would prefer a modification or new repayment terms if there is a possibility that the borrower may resort to bankruptcy to solve his debt problems.

5.  Create a repayment plan.  Regardless of the solution you decide to take on, the only way you can make it work is to pay your creditors.  Therefore, a repayment plan is really a must.  You need to budget your monthly income in order to keep up with your debts.  Yes, there is not a quick or instant solution to debt problems.  Nevertheless, you can take positive steps to keep your situation from worsening.  Remember, with self-discipline and motivation, getting out of debt is not impossible

Read More  Getting Out of Debt in More Ways than One

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LONDON (SHARECAST) - US shares made strong gains matching rises in Europe on a $1trn package cobbled together at the G20 summit and changes to the "mark-to-market" accounting rule for banks.

Dow closed up 216 at 7,978, having been over 8,000 earlier in the day. Nasdaq added 52 at 1,602, while the S&P 500 gained 23 at 834.

The "mark-to market" requirement forces banks to value debts based on the current market value. As banks collapsed and asset values tumbled, critics say it has accelerated the financial crisis. The changes come just ahead of the next bank quarterly earnings reporting season.

Under the new rules, banks can value the assets according to their own internal measures and also split losses attributable to a security away from general market movements.

The changes added to a mood of optimism following G20’s wide-ranging agreement. Leaders at the G20 summit in London agreed a plan to put the International Monetary Fund at the heart of efforts to kick-start the ailing global economy.

The major part of the plan involves Japan, the EU and other countries making $750bn available for the IMF to rescue struggling economies, compared with $250bn previously. Another part of the package involves a trade finance package worth to support trade between countries.

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