Strategies For Coping With Your Debts
If you're struggling with debt problems it can seem like you're trapped in a never-ending fight to keep your head above water, desperately juggling your finances around to keep your creditors happy. It can also seem like you're alone in your struggle, but this is very far from the truth. Millions of people have at one time or another been in a similar situation, and even though it might currently seem like there's no way out, millions of people have successfully left their debt worries behind.
There are thousands of sites on the internet offering help and advice, sometimes as a free service, but often as a commercial venture which you'll have to pay for in one way or another. With all this information overload, how can you even get started on deciding how to handle your debts? Read on to learn the basics of some of the most popular debt strategies, which will help you decide which strategy is right for you and is worth researching further.
This is the most basic way of getting your finances back in shape. By sitting down and working out all your income and expenses, you can clearly see the parts of your money management that need more attention. Often, this basic step will show up easy ways to economize, giving you a little more breathing space every month, and making it easier to pay those bills.
If, after examining your budget, you find that you really can't make ends meet, then it's worth considering taking out a consolidation loan. The basic idea behind consolidation is to take out one big loan which you use to clear all your other debts, meaning you only have one repayment to make every month. Ideally, your new loan will be at a lower interest rate than your current debts, so your monthly repayment will be lower. You can also spread the repayments over a longer period, taking some of the financial pressure off, but this will mean you're paying more in interest in the long run.
Some people who have serious debt problems might not be able to arrange a consolidation loan. This might be because they've already borrowed to the hilt and no lender is willing to advance any more credit, or it may be that in the course of their debt problems their credit rating has been badly damaged. At this point, debt management is a good option. It works by handing over the management of your debts to a specialist company or agent, who will contact your creditors on your behalf and negotiate a way forward, such as lowering interest rates, extending the repayment term, or cancelling previous fees and charges.
Entering into debt management has the great advantage of relieving the immediate stress and worry of dealing with your debts, but the disadvantage is that in most cases the management company will charge a fee, and the damage to your credit rating will be considerable.
Individual Voluntary Arrangements
This is a step further than debt management, in that the agreements you make with your creditors are legally binding. You will also have any remaining debts cleared after keeping to the arrangment over a period of five years. Should you fail to keep to the arrangement, then bankruptcy is the only remaining option.
This is the final step to take when all other attempts to handling your debts have failed. All your assets will be frozen and used to pay off your debt, and most of any income you receive during your bankruptcy period will also be taken from you. The damage to your credit rating will be almost irreperable, and even though many people have started to see bankruptcy as an easy way out of debt, the long term consequences are grave, and it should only be considered as an absolute last resort.
Debt Consolidation Loans Knowledge Is Power
A debt consolidation loan pays for multiple other loans or lines of credit. If you find yourself swimming in debt, this might be a good option. Debt consolidation loan is the best option when you have maxed out your credit cards and are yet paying for your car and house.
A debt consolidator will help you in making a single payment instead of making multiple payments. Managing your finances gets much easier. Also the interest rates on a debt consolidation loan are less since most of the debt consolidation loans are nothing but a home equity loan. Another good part is that since the interest rates are low, your payment is significantly reduced. If you have any issues or come up with questions, you have to make a single call to your credit counsellor instead of making several calls. One more advantage lies in the fact that the interest paid to a mortgage can be used as a tax write-off. This benefits you from a tax perspective.
Before you run out to get a debt consolidation loan, you also need to factor in the cons associated with this loan. For one, it is very easy to fall further into the debt trap. Since you will be left with more money at the end of the month, you will consider blowing it away rather than paying up for your debt. With the current economic situation, most mortgages are 30 year mortgages and this means you will end up paying your loan for the next 30 years. In terms of dollar amounts and over the lifetime of the loan, you will be spending much more than if you were to pay off the individual loans. The debt consolidation loan is against your home. This makes a debt consolidation loan a secured loan. Your creditors will take away whatever secured your loan and in this case it is your home.
As you can clearly see, debt consolidation loan are not for everyone. You have to look at the advantages and the disadvantages and make the correct decision for yourself.
Bankruptcy Or Iva The Procedure
Individual Voluntary Arrangement
The first thing to do when considering an Individual Voluntary Arrangement is to have a meeting with an Insolvency Practitioner. This meeting can either be face to face or over the telephone.
The meeting is to determine whether or not an IVA is a suitable option for resolving financial difficulties and to advice of what other options may be available.
If an IVA is the best solution, then the next step is for the Insolvency practitioner to gather information about the debtor's financial details. This includes priority household payments, information about any assets the client may have and all creditor information such as creditor names and account numbers.
The Insolvency practitioner is under obligation to verify all information given by the client, therefore the IP will gather proof to support that the details are correct.
Once the information is verified, the IP will then begin to draft the proposals. The proposals are to be fair to the creditor and debtor alike. The idea is to show the maximum amount the debtor can afford to pay and to show the creditor this information in order to get the creditor to accept the amount that is being offered.
Once the proposals are drafted up, the debtor will look through the proposals, and if happy, sign them. An IVA is a legally binding agreement; therefore it is important that all information is correct before signing the proposals.
Once the proposals are signed by the debtor, they are then sent off to the creditors for their consideration. Creditors are generally given 2 to 3 weeks to vote on the proposals. Creditors can either decide to accept, reject or accept with modifications.
Once the 2 to 3 weeks is up, the Insolvency Practitioner will arrange a meeting between the creditors and debtor for the final vote on the proposals. The Insolvency Practitioner will act as Chairman to the meeting.
Creditors generally fax over their decision to the IP on the date of the meeting. So generally is not an actual face to face meeting, more a deadline to get all the votes in on one day.
In order for an IVA to be passed, 75% of the value of the debt must be accepted. In other words, as long as the creditors who represent 75% or more of the debt accept the proposals, then the IVA is accepted even if some creditors rejected the proposals.
If the IVA is accepted, then the Insolvency Practitioner will send out a chairman's report to the creditors as well as the court detailing that the IVA was accepted.
Petitioning for Bankruptcy
Petitioning for bankruptcy could be as a daunting process, however, the procedure is probably not as bad as anticipated.
In order to petition for Bankruptcy, you will need to fill in a couple of forms. These forms can be obtained online from the Court website. The forms you will need are 6.27 and 6.28.
It is not always necessary to make an appointment to petition but it is always safer to call the court to see if it is permitted to arrive and petition or if an appointment is necessary.
Bankruptcy is normally held in the High Court in London. People will generally arrive first thing in the morning. Once at the court, the petitioner will go over to the first available desk clerk and inform them that they are there to make a petition. The clerk will look at the forms and then proceed to type up the bankruptcy order. The petitioner is then directed to where they need to go to pay the petition fee and return to clerk once they have done.
At this point, the clerk would generally give a time to return to collect a copy of the bankruptcy order.
Once the petitioner has their bankruptcy order, they will then be given directions to go to the Official Receivers office. When they arrive at the office, they will need to wait until their name is called. Once the name is called, a copy of the bankruptcy order will be taken and they will be given information regarding bankruptcy.
The petitioner will then be given a time and date of an appointment with the Official Receiver, sometimes this can be done on the day, but more often than not a telephone appointment will be given anywhere up to 2 weeks after the day of the petition.
Sometimes the petitioner will be required to return to the Official Receivers office for an appointment. Either way is possible so there is no need for concern if the petitioner is required to go back to the office rather than receiving a telephone call, it will basically be which way is more convenient.
Bankruptcy generally lasts 1 year; however, discharge from bankruptcy can be earlier or later depending on if there are any restrictions placed on the bankruptcy.
So there we have it. Although this is a very brief outline of what is likely to happen when choosing either option, it does give a general idea of what to expect.
Debt Management Plans A Way To Survive The Debt And Come On Top
Debt Management Plans
Debt Management Plans (DMP) is placed one step beyond credit counseling and a stone's throw short of bankruptcy. If you are too deep into debt and unable to pay them, a credit counseling agency may recommend Debt Management Plans. This is a serious step that should be considered carefully along with better money management skills and budgeting disciplines.
Similar to prescription medication that you would only take after consulting a licensed physician, Debt Management Plans should start only after you have talked it over with a certified credit counselor. Your certified credit counselor spends the time to review your financial situation, consider alternatives, and help you learn to handle money better. You want to stay out of debt after you get out of it.
What is Debt Management Plans?
In simple terms, your credit counseling organization begins to manage your debts on your behalf through direct interaction with your creditors. They come between you and most of your unsecured creditors, negotiate lower interest rates, eliminate certain fees, arrange payment amounts and prioritize which creditors gets paid first. In short, almost everything that could be done to get you out of debt fast. These plans cover most unsecured debts, like credit card bills, student loans, and medical bills. But secured debts such as real estate loans fall outside of these plans.
Before signing up with a credit counseling organization for a DMP, verify any concessions your particular creditors offer to that organization. All these concessions from your creditors amount to one thing: Lower your monthly payment and still get out of debt faster. In some cases, you will be able to pay you debts, years earlier. Ask your credit counselor how much earlier you will get out of debt if you stayed on course.
When DMP starts, you agree to send one monthly payment to the credit counseling organization and they in turn make all the payments to your creditors for you. In the meantime, you may have to agree not to use or apply for credit while you are participating in the plan.
Is a Debt Management Plan Right For You?
Cover the following with your credit counselor before you decide to participate in a Debt Management Plan.
Find out if there are other options besides the DMP available to you. Is your DMP handled by the same organization that also provides you assistance with money and budget management during and after DMP? If a Debt Management Plan is handled by one organization and another handles your ongoing credit counseling, how will you coordinate the two? Remember you want to stay out debt later.
Find out how enrolling in a Debt Management Plan impacts your credit and your credit score. Negative and accurate information on your credit record is not easy to remove despite any promises made.
Confirm what your monthly payment amount is and if you can afford it. Do not commit to something you cannot follow through.
Credit counseling organization promises concessions they can get from your creditors, such as lowering or eliminating interest charges and late fees. Confirm these with your creditors and see if there is a waiting period before these concessions kick in or do they start as soon as you enroll in a DMP.
Verify that your creditors are paid within the correct billing cycles and before their required payment due date.
Clarify the steps involved in getting status reports on your account from your credit counseling organization. How often? How detailed? Is it accessible by phone? Any hesitancy on behalf of the credit counseling organization to let you verify your account status is a big red flag that means you need to find another organization to help you.
Find out if your creditors are willing to reset the clock on your past-due accounts, wiping out the record of missed and late payments if you sign up with a Debt Management Plan. This process is called re-aging your account. How many payments should you make before your creditors are willing to do this?
What to do after Debt Management Plan starts?
Once you sign up with a Debt Management Plan continue to be active with the process, even though emotionally, you may want to wash your hands away and stay away. DMP does not relieve you of your responsibilities; it only helps you manage it better.
Keep in touch with your creditors and pay your bills until the DMP goes into effect. If you haven't had any negative entries in your credit report by now, any late payments, late and penalties can still be entered into your credit report.
Contact your creditors and confirm that they have accepted the proposed Debt Management Plan before you send any payments to the credit counseling organization for your DMP.
Call each of your creditors on the first of every month to make sure the agency has paid them on time and verify this by checking your monthly statements. Your monthly statement should also reflect any changes in your interest rates, waiving of the late fees and any other concessions you were expecting.
May you be granted freedom from debts both physical and Spiritually.
Poor Credit Debt Consolidation Loans Helping The Needy
Poor credit history, sub prime credit history, adverse credit history, non status credit history, impaired credit history or bad credit history. There are many incarnations of this term but the idea still remains the same.
It means that a person has taken a loan previously and has defaulted with the repayments. Which makes it difficult for people to get loans and even when they get loans it is at an inflated rate of interest. All this is estimated on the basis of your credit score and it represents our financial credit worthiness. A score of below 600 is the score which puts the tag of poor credit on us. There are other scores as well which tell us about our standing like FICO scores. Experts for calculating usually take factors like payment history, amounts owed and types of credits used. So they all should not be ignored.
Different need compel us to buy different loans to cater for each of them. This puts us in an unwanted position where we owe debts to numerous creditors.
A debt consolidation loan is a tool which helps us in dealing with that possibility. With debt consolidation loan the borrowers can take a single loan which would negate those earlier loans and those creditors who trouble us for not making our repayments in time.
Debt consolidation is even more useful for people with bad credit history because this gives them a chance to improve on their reputation of poor credit history. This can be done by producing the similar results as desired by the creditor. Not only that other benefits of going for debt consolidation include:
Finding Help To Get Out Of Debt
For many credit card holders, credit card debt can put a damper on what would have been a quick fix to financial woes. High credit card interest rates can lead to substantial credit card debt for millions of individuals and families around the world. It is far too easy for credit card holders to find themselves falling into credit card debt. High credit card interest rates are not the only factor that leads to a surplus of credit card debt, the high expenses people must cover in order to get by in their everyday lives lead to the general public seeking financial help. Credit cards seem like an easy answer, allowing customers to buy things now and pay for them later. However, if put in the wrong hands, credits cards can lead to even more financial trouble than the customer was already in.
There are a number of companies who capitalize on the large amount of credit card debt that can be found throughout the country and the world. These companies claim to have all the financial solutions customers who are in debt are looking for. How many times have you seen advertisements for companies claiming to get you out of credit card debt in five easy steps, or claiming to help you eliminate credit card debt in just months? The claims seem promising to people trying desperately to get themselves out of the throngs of bad credit. However, not all these companies can be trusted. It is important for any customers tempted by these get out of debt fast claims to first research these companies. Many companies simply use these empty promises as a way to prey on those who have already established bad credit and seem like easy targets to get quick cash from.
But do not worry, you do not have to fall victim. If you are tempted to employ the services of a company offering credit card help, be sure to do your homework. Research the company; try to find former customers to talk to, and make sure that your money will be spent wisely - helping you get out of debt. In far too many cases people who are already in financial trouble find themselves falling in further debt after being scammed by companies who claim to have all the answers to getting out of credit card debt. In fact these companies simply offer useless tips while scamming customers out of even more money. In fact, some debt-help companies do just the opposite - cause further debt for their financially troubled customers. Customers who are well informed and ready to find the right company to help them get out of debt will be able to spot frauds right away and employ the services of a company that will offer valid assistance rather than a hoax.
A Good Manager Of Your Debt Unsecured Debt Consolidation Loan
The efficiency of a good manager lies in the way he manages things. Managing things does not restrict to management decisions, but it has a long way to go. It includes managing any work in a given circumstances in the best possible and cheapest way.
Debt consolidation in simple terms means managing the debts of a person. Or in other words it implies merging up all your debts through single manageable loans. The loan always doesn't mean that the person is required to keep any security as collateral. There is also another way to get a loan. A way without collateral, technically it can be termed as unsecured loan. Thus, we can say, managing debts through a single loan and without collateral placed is unsecured debt consolidation loan.
Unsecured debt consolidation loan is the best option for the tenants and for homeowners who do not want to undertake any risk on their property. Although providing a security doesn't necessarily results in guaranteed debt consolidation loan. Before lending a loan the lender goes for a check on the credit history of the borrower. So, whether the person goes for a secured loan or unsecured loan the credit history plays a crucial role in it. But it doesn't mean the person with poor credit history will not able to get the loan. It may be possible but he can find some difficulties in applying for the loan as compared to the person with good credit history. These difficulties come in the form of higher rate of interest. Lenders also consider the ability of a person to pay back the loan.
Myth regarding unsecured debt consolidation loan:
5 Bankruptcy Questions To Ask Your Attorney Before Filing
If you think that being bankrupt is the worst thing that could happen to you than think again! Yes you are right...Worst is yet to come, but of course you can control and eliminate that worst scenario by simply making correct decisions! Hiring a wrong attorney for filing your bankruptcy can be like a nightmare coming true!
So it is better that before hiring you do some research and make sure that you find an attorney who could really show you way attorney who could really show you way out from the bankruptcy mess!
Facts about selecting the Attorneys:
As most of the attorneys are usually overworked, they aren't able to give ear to full details of your case. You may feel that your attorney isn't pursuing your case the way you want him to pursue and ultimately you will feel irritated.
Many of the attorneys aren't qualified enough to lead your bankruptcy case. So such attorneys don't fulfill your expectations. Certificates are important indicators to judge whether the attorney is qualified enough or not.
Asking from friends won't take you to any good lawyer, unless your friend has gone through filing for bankruptcy but it may be useful to take advice from legal professionals.
You can even go to a bankruptcy court and observe the attorneys there. Maybe during your observation, you will find some attorneys who are good enough for you.
Once you find the attorney, you can satisfy yourself completely by asking him the right questions. A short conversation can tell you a lot about the attorney you have chosen. You can ask him about his expertise and his working and consultation hours. After conversation, you can evaluate the attorney to see if that attorney is really right for you or not!
Once you select the attorney, you must discuss with him what type of bankruptcy should you file? There are eight different types for filing bankruptcy. You attorney can best point out which type suits you for filing bankruptcy.
Secondly, you need to ask him how you can file for bankruptcy. You have to file for your bankruptcy in the state where you are living. The Attorney can prepare the necessary paperwork that would be needed to present to the courts.
Thirdly, you must know the fees that are involved in the filing for bankruptcy. The total fees will comprise of the attorney's fees plus the court fees that you need to submit to file for your bankruptcy.
Fourth, you must know where you should file your bankruptcy claim. You need to consult your attorney on how to get there and what documentation is required.
Finally you must know the after effects of filing for bankruptcy. As soon as you file for bankruptcy, creditors will receive notification from the courts and will not be allowed to contact debtor for payments. A hearing in court will be set. The case will proceed depending on type of bankruptcy filed.
Remember that this is your fight, so you have to be really involved in it and follow the case. You just cannot leave everything on the attorney!
Five Reasons To Get Out Of Debt
Do you want to get out of debt but can't find the motivation? Do you dread the mail arriving in case it brings you even more bills to pay?
Well if you need a burst of motivation to improve your financial position, I've put together five reasons to get out of debt and avoid borrowing in the future.
1) Everything that you buy becomes much more expensive
OK, I'll show you. While out shopping you just can't resist buying a new plasma television. The price was $2300, but it has been reduced to $1995. Bargain! So you sign up to an attractive looking credit agreement.
How much will is cost? This is not a trick question.
Whenever you borrow to buy something, the total cost to you is made up of three distinct parts.
a) The actual amount that is borrowed - $1995
b) The interest on the loan - Perhaps 3 years at 29.9% APR. That would come to $915.78 (36 payments of $80.85 less $1995)
c) These payments must be made from your taxed income - Let's say 30%. That would add another $1247.40
So taking all of these things into account, you'll have to earn an eye watering $4158 to pay for your television.
And that's before we take into account the opportunity that you've lost to earn interest on the money that you're using to make the loan repayments. At 5% per year over 3 years this could amount to another $300 in lost interest.
Doesn't seem such a 'bargain' any more, does it? Do you really want it that much?
2) Lack of Freedom
The world is full of credit junkies. Too many people hold a 'must have' attitude that they simply can't afford. Unfortunately, this position translates into a 'must borrow' state of mind. They borrow in order to feed their need for a regular consumer spending 'fix'.
But this addiction is not without its consequences. Every time you borrow money you forfeit a piece of your life. It means that your lender owns a bit of you. They own the time that you take to earn the money to repay the debt every week or every month. Welcome to life as a human limited company....and your lender has just become a major shareholder!
Every pound of debt reduces the freedom that you have in your life. It's a simple equation.
Debt = lack of freedom to spend your time as you decide
Part of your precious, non-renewable life, now has to be devoted to acquiring enough money to repay your creditors. Your personal freedom has been curtailed. Every pound of interest paid represents a waste. Waste of your money. Waste of your effort. Waste of your time. Waste of your freedom. WASTE OF YOUR LIFE!!
What's the most common reason for rows between couples? Work, children, sex, the house, trivial matters?
The answer is money. Debt is the biggest cause of rows and relationship problems.
This is the inevitable result of the last two items. You owe money that you no longer have. You have to repay it with interest. You have to work every hour available just to make ends meet. And at the back of your mind is the nagging doubt, 'what if I can't keep up with the repayments?'
Then on top of all that worry, there's the frustration of being permanently skint, despite the fact they you've never worked harder in your life.
And all the time your 'better half' is nagging you about never having any money and the amount of time that you've been spending at work.
With all debt, there's always the chance that it will spiral out of control. One debt can lead to another debt. After you've borrowed money once, it becomes incredibly easy to do it again, and again, and again!
It's the easiest thing in the world to say 'Oh I'll just stick it on my credit card', but it's much harder to repay! Especially when you've got interest working its mischief against you!
Eventually, it can get to the stage where you can't even afford to repay the interest, let alone the original amount you borrowed.
And the end result?
Life is not be as happy and exciting as it should be! And if that's not a good enough reason to get out of debt, I don't know what is.
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