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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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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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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If you’re a college student with student loans, have you considered obtaining a student consolidation loan?  Why, you may ask?  In this article, let’s discuss what a consolidation loan is and why student consolidation is a good move to avoid bad credit. 

Just like a regular loan consolidation, student consolidation loans will enable you to pay off all types of student loans in your name in a single payment.  Most college students obtain two kinds of loans for their education since a federal loan is often insufficient in covering all college expenses.  If you have a federal loan and a private loan, managing both separately can be a challenge.  However, if you consolidate the two, you’ll only have to make a single payment for all student loans you have. 

What are the advantages of having a consolidated student loan?   

First, it simplifies your duties when it comes to submitting payments.  You don’t have to juggle between different lenders or submit several payments every month.  With a consolidated loan, you can keep up with your account more conveniently to make sure you will not miss a single due date of payment. 

Another great advantage of a consolidated loan is the lower rate of interest.  By combining all your student loans into one, you’ll only have to pay for a single interest which can significantly lower your payments.  Today, the maximum rate of interest for consolidated student loans is 8.25%.  For Parent PLUS loans, 9% is the maximum interest for consolidation.   

Apart from these two major advantages, student loan consolidation programs offer more flexibility when it comes to repayment options.  A borrower under a loan consolidation program is given the option to choose a repayment term that best fits his or her financial capacity.  As a student, this makes a big difference in managing your student loans and avoiding bad credit.   

For instance, you may choose to extend your repayment term’s duration if your current budget does not allow you to pay through a regular repayment term.  Nevertheless, be aware that the amount of your repayment would understandably be higher if you choose a longer term. 

As a reminder, it is important to remember that different financial firms offering student loan consolidation program offers varying rates and fees.  Therefore, it is up to you to find a lender who offers the most reasonable amount of interest and repayment terms.  

In addition, a student must keep in mind that obtaining a student loan consolidation should not be regarded as a way to go easy on your loan repayments. Always try to pay off as much as you can out of your student loan.  This way, you can complete your student loan payment sooner, enabling you to save significantly from interest. 

Finally, never risk accumulating or defaulting on your student loan debts as this will badly damage your credit reputation.  Keep in mind that you need to maintain excellent credit especially as you near your graduation from college.  A good credit history will open more doors of opportunities for you when you start seeking employment.

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Finding the right debt consolidation service can be a challenge.  If you search online, you can find a long list of agencies and companies offering a variety of debt consolidation programs for different types of debt problems.  In this article, let’s talk about the factors you should consider before consolidating.

Check the company’s background.  How long has the agency been offering debt consolidation services?  What kind of reputation has it made in the industry?  Is it licensed and accredited by the government?  Does it belong to any national or reputable organization in the country?  Also, check from the Better Business Bureau if the agency has any record of complaint from its past or present clients.  If there have been complaints about the company, find out if these cases have been resolved.

Read reviews online.  What do clients say about the company’s services?  Would they recommend this debt consolidation company to others?  However, don’t just rely on the reviews that are posted on the debt consolidation company’s website.  Do your own research as well.  You can check these out by reading customer reviews from forums or online community discussions.

Research about the debt consolidation program.  What kind of debt consolidation program does the company offer?  Some companies may offer a loan to enable you to pay off all your existing debts at once.  Others may enroll you in a consolidation program where you’ll be submitting monthly payments to your debt consolidation agency.  In turn, the agency would distribute your payments to the appropriate creditors.  Before signing up with any company, make sure that you’re clear about the rules of the consolidation program.

Avoid companies that require upfront payment.  If a company demands an upfront payment before rendering any service, it’s best to take your business somewhere else.  Such companies are obviously interested only in making money, not in helping you recover from your debt problems.  These kinds of companies are most likely to charge you with hidden fees or unreasonable fees in exchange for their services.

Don’t give away your personal information in exchange for a free quote.  Some online debt consolidation agencies over the internet may require you to fill up a short application form in exchange for a free quote.  Although this may seem harmless, you should be cautious about providing any information about you or your finances.  If you give out personal information to the wrong hands, you can become a victim of identity theft.

Read and understand the contract.  Carefully examine your debt consolidation contract before signing up.  What are the exact terms of its services?  What are the costs and how much would you pay?  Pay special attention to the disclosures that are included in your agreement.  If your contract contains blank spaces or blank lines, do not sign the document, as additional details can be inserted on it after you’ve signed it.  Are there vague clauses in your contract?  If so, demand a clear explanation from the company or better yet, just take your business somewhere else.

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President Barack Obama’s budget threatens to cut a benefit many Americans view as practically a right — the mortgage interest tax deduction — and powerful real estate interests are fighting back.

The move would affect only households earning $250,000 or more, but opponents say it could prolong the housing crisis by slowing already torpid home sales and deal a another blow to home values ravaged by the market crash.

"Even though the intended impact is on the top 2 percent of households, the unintended consequence will be a reduction in home values for homeowners across the country," said Lawrence Yun, chief economist for the National Association of Realtors.

The Realtors’ group contends that the loss of the tax break will lead high-income homebuyers to spend less on homes, which would eventually drive down prices at the high end. And if mansions cost less, modest bungalows will ultimately see their values fall as well, Yun contends.

The odds of that happening may be greater in California, where about 500,000 tax filers who claim the mortgage interest deduction earn enough to be affected by the proposed cut, the Realtors’ association says.

The National Association of Home Builders and the Mortgage Bankers Association were also quick to oppose the Obama proposal.

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It is not a secret that thousands of college students will graduate with a degree plus thousands of dollars left unpaid on their student loans.  Statistics prove that student loan debts are estimated to run from $10,000 to an astounding $50,000 posing a huge financial challenge to newly graduated students who are just about to start looking for jobs.  To avoid being stuck in a debt situation, how can you as a college student avoid bad credit at all costs?  Here are some advices worth pondering:

Choose your student loan carefully.  If you plan to obtain a private student loan, do extensive research and find a lender that offers reasonable rates and terms.  Don’t rush into signing up for a private student loan based on what the advertisements tell you.  Be sure you understand what you’re signing up for especially when it comes to the interest rates and costs that are associated with your loan.

Consider a student debt consolidation loan.  If you obtained two or more student loans, it is advisable to apply for consolidation.  Most federal student loans are not enough to cover all college expenses so students often apply for a second loan from private firms.  To keep up with these loan payments, a student consolidation is a wise move.  It helps you lower your interest rate and minimizes the risk of late payments.

Use your student credit cards with caution.  Student credit cards are wonderful additional support for a student in college.  But because credit cards are so easy to use, some students forget to put their spending under control.  Most even use their credit cards for purchases that are not needed for their studies.  Because of high interest rate in student credit cards, it is easy to get stuck in unmanageable debt.

Be aware of your responsibilities.  Be especially aware of your payment schedules as submitting your payments late can cost you additional charges that could’ve been avoided.  Don’t forget that you will incur high interest rate on your student credit card if you fail to pay off your balance on time.  Add the penalty fee for submitting late payment and you’re adding up more expenses to your budget.

Be frugal.  Ultimately, avoiding bad credit is up to your spending habits and lifestyle.  Learn to allocate your monthly allowance effectively.  Prioritize your expenses to make sure that you’ll be able to pay first the most important costs you need to shoulder or debts you need to pay.  This will help you avoid splurges or unplanned spending.  Create a written budget plan for the entire month and don’t forget to include setting aside some portion for your savings.

Save, save, save.  Keep the habit of saving your money every time you have the opportunity to do so. Even if you have a student loan or a student credit card to count on for unexpected expenses, do your best to set aside your money so you can have something to spend on emergencies.

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