A Closer Look at Bankruptcy

By Ridwan

Bankruptcy is a process of the federal court that is aimed at helping both businesses and individuals in clearing up their debts and repaying under the protection given by the bankruptcy court. There are basically two types: liquidation and reorganization.

Liquidation bankruptcy, under Chapter 7 of the bankruptcy code, occurs when you plead the court to have your debts discharged. Some of your properties will then be liquidated or sold by the bankruptcy court, returns of which shall be divided among your creditors. This type of bankruptcy proceeding lasts for four to six months which is quite fast and only one appearance at the courthouse is necessary. It is very convenient and doesn't require payments stretched over time.

Chapter 7 bankruptcy isn't available to everyone, though. You may won't benefit from it if in the past six to eight years, you have benefited from a bankruptcy discharge. Likewise, if after examination of your income, expenses, and overall debt, it was found out that the other type of bankruptcy proceeding is more appropriate, then you can't insist on pursuing this kind. Veterans who are now disabled and who incurred their debt at the time of their active duty are almost automatically allowed to file. In addition, those people whose debts are caused by running a business are qualified as well. For those people not belonging to any of these categories, certain criteria must be met.

The criteria has been affected by the new rules imposed on bankruptcy. One of the considerations is your current monthly income which in turn will be compared against the median income for a family of similar size in your state. This isn't your income at the time of your filing. Instead, it is your average income for the past six months before filing. Social Security benefits like retirement and disability benefits aren't included in the computation. If your income appears to be enough to support the other type of bankruptcy proceeding in spite of permitted expenses and payments for child support, tax debts, and others, liquidation bankruptcy is unfortunately not allowed.

Many people, if given a choice, would prefer this type since repayment of a portion of the debt is unnecessary. You may lose some of your properties but some courts permit some sort of a leeway that doesn't take all to give you something to start with afterwards.

On the other hand, reorganization bankruptcy, usually under Chapter 13, happens when you file to a bankruptcy court a plan on how you intend to settle your debts. You indicate how much each of your creditors will get, depending on your finances. There will be a three- or five-year repayment plan, only after which can you be discharged of your debts, if any still remains. At times, however, due to obvious financial difficulties, the court itself decides to give a discharge earlier than planned and this is what usually happens.

An additional requirement for both types of bankruptcy is completion of credit counselling conducted by an agency recognized and approved by the United States Trustee’s office. This helps you look closely at the situation at hand and identify if bankruptcy is really essential. This allows you to see several possibilities of informal repayment which you may have overlooked in the past. Even if such is obviously impossible, counselling remains a major requirement. Furthermore, completion of post-counselling is required after the proceedings. This aims to teach you financial management to avoid encountering the same situation in the future. The bankruptcy discharge will not be released unless this is fulfilled.

Bankruptcy may be beneficial for both the debtor and creditor. This is a way of recognizing one’s responsibilities and mistakes that led to the financial difficulty. The entire process takes into consideration both parties’ interests and leads to the development of an action plan that fulfils them. As such, this law shouldn't be abused by any debtor thinking that a court is there to intervene.

Bankruptcy, although generally advantageous, must be considered as a last resort. You should, in all circumstances, work hard to be in full control of your finances to avoid being estranged in difficulties. Discipline is indeed a very crucial trait that must be maintained at all times.

How To Take Charge Of Your Debts

By Ridwan

The rising cost of living and dying has made people more reliant on loans and credit that most people have been indebted to someone at some point in their lives. A debt is an obligation that should be paid and accounted for no matter how meager the amount.

Being in debt is normal considering that no one has a monopoly of all the money in the world. People will always have the tendency to accumulate debts no matter how rich. In fact, rich people have more debts than poor people because they have more needs and they have more collateral or security.

Being indebted isn't something that you should be ashamed of provided you are a responsible debtor. This means the money was used for a very good cause or purpose and the debtor is religious in looking after his responsibility to pay his debts.

Even a person who is savvy is financial management can get into debt for one reason or another. However, a person who is good in managing his finances should also be good in managing his debts. Managing debts would include the ability to know how much a person owes and from where he would get the money to pay such debts.

The ability to know the total indebtedness is a must in debt management because the person who is in debt is aware of the total amount he has to produce to pay off his debts. There are people who don't practice good debt management and they keep borrowing money without being able to monitor how much they already owe people or the financial institutions.

Debt management means that at the time the loan was made, the borrower knows where he would source the payment for such debt. This makes the debt manageable because it would appear that the person has some source of income and he is just not liquid at the time he borrowed the money.

People who don't have a steady source of income should be discouraged from borrowing because there is a tendency for their debts to pile up without being paid at all. Unemployed people who resort to borrowing for their essential expenses like food and daily subsistence would borrow from another creditor to pay off a debt that is already due and demandable. The same thing happens to the second and the next loans after which it becomes a cycle.

A person who is indebted to someone should take an inventory of his assets that can be used to pay off his debts. There is no problem if the debtor is looking at a possible income that hasn't yet been encashed or paid. Such unpaid income can be considered an asset which can be used to pay his debts.

Debts are easily made but they are difficult to pay. Thus, every person should be careful when borrowing money form others. Make sure that you have something to pay for the debt like an incoming income or check, or assets that can be sold to pay off the debt.

Some people get indebted by virtue of loans which have varying interest rates. This means that aside from the principal amount borrowed, the debtors still have to pay for the interest rate. A person who borrowed $100 at ten percent interest rate per month will have to pay the principal plus the interest rate of $10 per month. Some interest rates are based on the actual balance like if the debtor has already paid $20 then the interest rates would only be pegged on the balance of $80. However, there are some interest rates pegged at the original amount borrowed.

While being in debt is a natural thing, every person should learn how to manage his debt and how to stay out of debt if possible. One of the major factors why most Americans are indebted today is the misuse of credit cards.

Credit cards are those plastic cards that can be used to pay for almost any purchase even if you don't have cash. People find it easier to spend when using their cards because they just swipe it and voila, it works like a genie granting their every wish!

However, most people who fail to use their credit cards wisely become indebted and are faced with legal actions for failing to pay their cards when they become due and demandable.

Go ahead, borrow if you must but always take charge of your debts to make sure they don't lead you to declaring insolvency or bankruptcy.

What Every Consumer Needs to Know

By Ridwan

Building good credit history is extremely important to one’s life. There are many things that you can be deprived of if you don't have a good credit history.

The magnitude of building credit goes far beyond clothes and groceries. It is more than just those petty cash advances or cash back rewards. Building credit would appropriately mean building your life as well.

Why? Simply because the way you handle your credit will put a great impact on your way of life, on your career, the way transact business with other people, and even on the place where you live.

Your credit history is one of the most important factors employers, lenders, property owners, or business owners will consider.

For this reason, it is extremely important for you to learn how credit is bestowed or rejected. It is also imperative to know what to do in case you have been unduly cared for.

In the United States, the Federal Government had provided its citizens certain major laws that control credit. These rights have been stated as provisions on Fair Debt Collection Practices Act and Fair Credit Reporting Act.

With these two particular laws, every consumer is entitled to such rights stated therein. It is extremely important that the consumers know these rights so as to bear witness on whatever maltreatments or unduly practices of debt collectors and lenders.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act is one of the written laws of the United States, which had been included in the United States Code as Title VIII of the “Consumer Credit Protection Act.”

The main focus of this particular law is on the guaranteed “ethical practices” in the ways of collecting debts upon the consumers. It also seeks to present consumers with an opportunity to obtain and dispute legalization of any information regarding a particular debt so as to guarantee the data’s correctness.

In essence, Fair Debt Collection Practices Act encourages just, rational, and non-discriminatory treatment of consumers by forbidding debt collectors from utilizing unjust, offensive, or misleading actions.

The Fair Debt Collection Practices Act is applicable to qualified debt collectors capable of collecting loans that they didn't create.

However, this act doesn't theoretically pertain to department stores, banks, and other lending institutions that have their own debt collectors; no lending company of good reputation is allowed to make use of the said practices.

Under the Fair Debt Collection Practices Act, the following provisions were made:

• Debt collectors are only allowed to contact other people, aside from the debtor himself, only to find out any whereabouts of the debtor.

• Debt collectors aren't allowed to contact the debtor before 8:00 a.m. and after 9:00 p.m. local time.

• Debt collectors aren't permitted to intimidate, pressure, or make threats to the consumer with legal action or arrest if it is not duly planned, considered, or made known to third parties, or at least talk about debts with them.

Fair Credit Reporting Act

The Fair Credit Reporting Act upholds the confidentiality, discretion, and truth of information as used in creating customer credit reports. It seeks to control the distribution, collection, and utilization of “consumer credit information.”

Under this law, the credit reporting agencies are required to uphold absolute, full, and accurate files and information.

With this act, consumers are entitled to receive their credit reports and to take actions to validate the correctness of information contested by a customer.

The consumers are entitled to such actions under this law:

1. Credit bureaus are permitted to provide credit reports only to those with a lawful business causes

Credit bureaus are not allowed to disclose any information or credit report to institutions that have no legal basis as to their request for a particular credit report information. Only entities such as insurers, employers, creditors, and government agencies are allowed to receive an individual’s credit report as part of the evaluation process.

2. The consumer’s right to know regarding denied credit

In cases like denied credit, consumers have the right to know about the details of such report. With this, consumers can identify which credit bureau issued such report.

In this way, the consumer will be able to check if there has been any discrepancy.

These are just some of the rights consumers can enjoy under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.

With these laws, the rights of the consumer to a just and fair treatment are upheld.

Lifestyle Changes You Need for a Debt-Free Life

By Ridwan

Too many temptations in this world lead to being piled with insurmountable debts. Advertisements tell us that with credit cards, nothing's impossible. Salespeople and credit businessmen tell us that it won't hurt to have a debt here and some debts there. Little do we know that debt could actually lead to death! It's POSSIBLE to DIE from DEBTS.

How, you may ask. Ever heard of suicides committed just because one has too much debt that that person could not think of any other solution but to get out of his debt-laden world through killing himself? No? You're not reading enough news, I'm telling you.

So, how do you avoid being victimized by debts? Learn a thing or two from the following bits of advice on how to manage a debt-free life:

Get the Drift of Being Thrifty

One major way to avoid having debts is to have enough money for your needs and even for your wants! How? Aside from landing a high-paying job, being a savings-savvy person at the same time is the solution. But what if you don't have a quite well-paying job? Knowing how to save up will still help you in your goal. Here are some simple tips:

Budgeting well whatever amount of money lands in your wallet every payday should be one of the major goals of a debt-free life advocate. You have to evaluate yourself to know what type of budgeting will suit your tolerance and lifestyle. Do you need a daily budget scheme? How about a weekly or a monthly one? You cashflow will be better monitored if you list all of the your expenditures and actual expenses.

Brown bagging should become a common practice if you are to make yourself debt-free soon. Now if you haven't fallen for the culprit yet and you are just so not into the food you prepare yourself, consider compromising. Instead of bringing a lunch box of some sort, learn to drink your office coffee so that you have enough moolah for your lunch.

Coupon clipping is a good move, too. This will not only make you help save but can earn you some friends too that may support you in your debt-free life campaign. How? Look for other coupon-clippers and trade.

Do you know how to save on phone services? If you need to make long distance calls, don't be sweet-talked by the smooth operator. Asking for help from the operator means having to spend more. If you use phone cards, check the expiration date and know if there are any hidden charges.

Club memberships that are rarely used should be dumped, too. What could be more stupid that wasting money on things that don't get used, right? Speaking of rarely used things, how about stopping credit card use all at once? Learn to afford not swiping that evil card if you want a debt-free life. It's one of the biggest temptations in this world!

Distinguish the Evil Forms of Debt

There are two kinds of debt. The good one is that kind of debt with which the item that caused your debt could be sold and the proceeds could help you repay the debt. The bad one is a loan that has a diminishing value.

An example of a good debt is a home loan that is if such home loan, particularly a home equity loan will add value to your home but if you will acquire such loan for unnecessary items, you're doomed. An example of a bad debt is clothes, unless you're a celebrity of course, wherein you can auction off your clothes when you get tired of them. School loans aren't advisable because it will most likely be hard for someone to pay off his or her debt even after landing a good job since there are various expenses that will come when working life starts.

So, how do you stay debt-free or at least be able to manage well your debts through the abovementioned information? Avoid bad debts!

None of this would be possible without taking the first step. Start tracking your spending habits today and tailor your moves to your debt-free life goals. Self-discipline will help you breeze through it all.

Creation of a Budget

By Ridwan

No man is an island. We all need help once-in-a-while. We’re not only referring to personal matters. We’re talking about financial matters. We reach a point where we have to buy something out of necessity, but we can’t pay in full just yet. An example of this is a home.

Now the time has come for you to repay on what you own. You must have the discipline to plan out how much you should have saved so when your time is up and you have to shell out the money you owed there and then (plus interest), you wouldn’t have a hard time doing so.

Prioritize which of the debts must be paid first. Prioritize your bills. Make a list so it would be more organized because you could see it right in front of you.

This is what you call establishing goals. Establish first what must be prioritized over those you could schedule paying some other time.

The essential debts are debts that should be on top of your list. These are :

- Rent or mortgage. Of course, who in his right mind won’t pay up as soon as possible. Paying your rent or mortgage bills on time helps you have a roof over your head.

- Child support. If you don’t pay on time, there’s a possibility you can be held behind bars.

- Utility bills. As much as possible, set aside a budget on gas, heating, water, electricity or telephone when you get your paycheck. In doing so, when the bill comes, then you have something prepared.

- Car payments. This also includes car maintenance.

- Other secured loans. If you don’t repay collaterals, the creditor takes the property even without court interference.

The non-essential debts can be set aside because when these aren’t paid, they don’t have that much of a side effect. It’s a desired goal but not really a priority. The only concern that can be considered when you don’t pay non-essentials debts for a long period of time is the negative image it could project on your credit report.

- Department store and gasoline charges. Failure to pay these charges may result in losing credit card privileges. If it’s too large, you might be sued.

- Loans from friends and relatives. Morally speaking, there is an obligation to pay but sometimes since they’re family, we think that they will understand if we can’t. Check with them if you can delay the payment and ask them for how long.

- Newspaper and magazine subscriptions. Little by little, if you haven’t paid, they’ll amount to so much.

- Legal and accounting bills. If these remain unpaid after a long period of time, then that’s when you might be sued.

Experiencing Debt-Free Living Today

By Ridwan

Have you experienced being up to your neck with debt? How about a life without debt? Have you experienced that too? If you have, you must know the big difference. And for sure, you will choose the latter.

But don’t worry. Even if you are in a sea of debts right now, you can still come out of it victorious. It is still possible to lead a debt-free life. Just follow these simple steps:

• Prioritize paying your deBts. Yes. In order for you to be free of debt, you have to pay for it in full. There’s no other way about it. This is the main solution; the only solution.

• Get professional help. If you feel that you can’t possibly get out of your debts on your own, there are many companies out there which offer debt management services and consolidation. Try talking to them and select the system that will work for you.

• Prioritize accordingly. Before you spend on anything, think twice about it. You also have to make sure that your monthly debt obligations are always met. Don't pass up payments. You wouldn't want to recede into debt further.

• Control your money. Control means you aren't going to spend on the spur of the moment. You will be more conscious on how your earnings are spent. You won’t focus on the luxuries. Instead, you will dwell more on the necessities of life.

• Use your credit card sparingly. A credit card is something so powerful it can help you or break you. Choose not to be broken by a credit card. Use it wisely. Don't use it for unnecessary and small purchases. Always pay with cash when you have it.

• Stay out of debt. In cases where you can put off applying for a loan, do it. If you can save instead of calling your loan agent, settle for that. Loans are simply excess baggage in the long run. Don’t apply for one unless you really have to.

• SavE. Not just for rainy days but always. Your savings is going to be important in times of emergencies and times where you want to make a big purchase. Save as much as you can in any way you can.

Here are the basic things to do to be free of debt and stay out of it for the rest of your life. Follow these simple tips and you are sure to live a happier, fuller life!

Different Options For Consolidating Your Debt And Saving Money

by: Devora Witts

Debt Consolidation Loans are not the only way to consolidate your debt, there are many other financial options to reduce your monthly payments and cut on your overall debt. With this information you will be able to see which option best suits your needs and start the process of eliminating debt.

Credit Counseling Agencies

There are agencies that will guide you through the process of consolidating your debt for a small fee. If you are not familiar with financial concepts and are not used to dealing with budgets, interest rates, loan terms, etc. this is probably the best option for you. You practically will not have to do anything; instead, the credit counseling agency will prepare a budget for you, activate its agreements with financial companies and debt collectors and reduce the overall amount you pay monthly. You will then have to make a significantly smaller payment to the credit counseling agency each month and the agency will take care of the rest.

Bear in mind though, that there are many scams going around with some fake agencies that will ask for money and then do nothing. Not only you would be loosing the fee, you would also be incurring in delinquencies with your creditors by missing payments or paying late. There are some online companies that provide access to many lenders, debt negotiators and credit counseling agencies that make sure all of them are legit.

Debt Consolidation Loan

A debt consolidation loan is a loan you take in order to repay all the other debt. The key to consolidation loans is that if you can get a competitive interest rate, you can save thousands of dollars in interests. However, in order to get a good deal on consolidation loans, you will probably have to provide some kind of collateral. There are unsecured consolidation loans but the interest rate can turn out to be too high for its purpose.

Debt Consolidation – Negotiation

Another excellent way to consolidate your debt is to resort to the aid of professional negotiators that usually offer their services online. You will find there are online companies usually referred as Debt Consolidation Agencies, that will undertake negotiation with your creditors and agree to new repayment schedules with a considerable reduction on the interest rate charged and sometimes even a cut on the debt’s principal.

These agencies can reduce your overall debt by up to 60% while at the same time ending those bothersome calls and letters from debt collectors. Your monthly payments will be considerably reduced and your repayment program extended so you can afford the payments without making huge sacrifices.

These agencies, however, charge a small fee for their services. Nevertheless, some of them take care of all your payments and include the fee in the monthly installments. Given all the money you would be saving, the small fee will pass unnoticed. As with Credit Counseling Agencies you need to be wary of illegitimate agencies that you might run into.


About The Author
Devora Witts is a certified loan consultant with several years of experience in the credit area who instructs people regarding credit recovery and approval for personal loans, home loans, consolidation loans, car loans, student loans, unsecured loans and many other types of loans. If you want to understand Unsecured Loans and Homeowner Loans thoroughly you can visit her site http://www.badcreditloanservices.com/. If the link doesn't work, just copy and paste www.badcreditloanservices.com in your browser’s address bar.