Debt Relief: Difference between revisions

In today's world, debt is almost unavoidable. We have been brainwashed to think that more is better, regardless of what more is. Our society is largely commercialized. We are bombarded with subliminal messages, urging us to buy, buy, and buy; and many of us do just that. We buy without knowing how we are going to pay. We live above our means trying to keep up with the neighbors. The cost of living increases but our income seems to stay the same. It is virtually impossible to avoid getting into debt. In our diverse society, we have one basic commonality: [[Debt Relief:Definitions#Debt| debt]]. Debt can be controlled, but we all need to understand it and learn to avoid too much of it.  

The following information is designed to answer questions about debt and offer solutions to control it. Contents range from financial planning to [[Debt Relief:Definitions#debt Consolidation| debt consolidation]], [[Debt Relief:Definitions#credit reports | credit reports]] to [[Debt Relief:Definitions#bankruptcy | bankruptcy]], and more.

'''Debt Management''' is the process by which debts are consolidated into one '''lower monthly payment'''. This '''one payment''' is an amount clients '''can afford''' and that is apportioned amongst their creditors. The payments made go directly to creditors on a client's behalf.   

An [[Debt Relief: Interview#Interview | Interview]] conducted with a local agency on the issue of debt management summed up some important for anyone seeking help managing their credit. Here is a summary of the information gathered up from the meeting:

Credit counseling and debt management agencies offer professional help to individuals in need of assistance in paying off their debts. These agencies look at the client's bills, listen to their needs, make recommendations, and create budgets. Although these companies have received bad press in the past, researching before selecting a company can assure you of their safety. In your search make sure your choice is accredited with an institution, such as the Better Business Bureau. Also a debtor must make sure to look at state laws, so that he/she is not overcharged for financial help.

1) Helpin debtors to assess their debt situation.

2) Avoiding overspending and handling existing debts are other areas consultants help debtors with.

 

3) Helping the client to build and maintain good credit.

Most financial advisors agree that the most important step a person must take before seeking counsel is to change their money management skills. The debtor must change the way he/she thinks. They must rid themselves of all financial anxieties or debt will probably accumulate again.

==Managing Your Credit==

*Apply for a [[Debt Relief:Definitions#secured card | secured card]] or deposit money in your checking account.  

*Do not use your credit cards to purchase food. You will pay 10 times more in interest than what one meal would have cost if you had paid cash.  

*If possible, consider transferring the balance of your credit card to a lower interest rate card. If you do this, immediately destroy the card with the high rate and close the account.  

For those who need assitance managing their credit there are a variety of choices and options out there. In an article by Hispanic magazine, financial author Julie Stav explains what a FICO score is, how credit bureaus calculate it, and steps on ways to improve your score. An article by U.S. News and World Report states the following steps to keep this score manageable:

 

 

 

4.) Do not apply for too many loans.

A great self-help guide to consider is Repair Your Own Credit which instructs debtors how to repair their credit and how to reestablish credit. It also lists organizations that will either give people free assistance or charge a very low cost to help someone stay out of debt. In NEA Today, they also refer to some credit management agencies such as Equifax as well as warn people about credit repair clinic rip-offs saying they do not do anything that you cannot do yourself. The counselors at Credit Union Magazine suggest that bankruptcy be the last resort in certain circumstances.

Credit card agencies such as Visa, Discover, MasterCard, and American Express have departments that provide essentially the same services as debt consolidation and debt management companies; however, debt reduction and credit counseling are entirely different functions than what the credit card companies do best. Credit card companies typically prefer their card holders use specialized debt consolidation firms to help with debt consolidation. These firms take on a substantial burden of individual repayment agreements and terms as well as attendant paperwork. MasterCard for example, prefers their card holders use a debt management service. Therefore, Mastercard does not advertise a debt management department within their company. The Mastercard consolidations department will respond to requests for debt consolidation if a written request from the card holder is made to the proper department.  

# Evaluate where you stand with your debts.

# Don't wait until you are in over your head.

Numerous experts also agree that a nonprofit company is the best way to go for premium terms. Also, no matter if they are for-profit or nonprofit, one should gain as much information as possible about the company before dealing with them. Futhermore, ensuring the institution you choose works with your creditors. Checking their status with the Better Business Bureau is a great idea. (Brown, 326) However, there are many different opinions on how to go about this. One common opinion is that only school loans should be consolidated, and this is only because of the enormous necessity of a college education. (Orman, 149)

What can you do if the law has been violated? A debtor has the right to sue a collector in a state or federal court within one year from the date of the violation. If a suit is favored by the debtor you may recover money for damages, court and attorney costs, plus an additional amount up to $1,000. A group of debtors can sue and recover funds for damages up to $500,000, or 1% of the collector’s net worth, whichever is less. Any problems or concerns can be reported to your state’s Attorney General’s office, the Federal Trade Commission, and/or the American Collectors Association or local State Bar Association.  

*'''Chapter 7 bankruptcy:'''involves the liquidation of all your assets that are not exempt from the bankruptcy settlement.

*'''Chapter 13 bankruptcy:'''is a court-ordered and approved repayment plan to your creditors.

Initially, the person filing will get a sigh of relief from being overwhelmed. Later, credit agencies and other lenders will analyze his/her credit information with a fine tooth comb for at least "ten" years or longer. This a combination of an advantage but a disadvantage to debt relief. Lenders almost immediately view a person as a high - risk for credit due to having bad debt written off through bankruptcies.

Chapter thirteen can be filed in a court with a trustee assigned and is considered a "reorganization" over a period of time to repay debt. The court trustee decides the total amount to be paid back and the time allotted for payment. The person's salary or income determines what will be allowed for the cost of living and the amount that will be disbursed to the creditors. No new debts can be accumulated without the court's permission (i.e., credit cards, loans). Upon closing, obligations are fulfilled and the person can begin on a new credit journey, but the on this new path the person needs to be aware the discharge will remain on the credit report for the next five to seven years.  

Chapter seven can be filed in a court and the person will walk away from most of the debt secured and unsecured. The person's salary is freed from the threat of garnishments and being sued by the creditors. The information stays on the credit report for the next ten years and creditors will be view the person as a higher - risk than if the person had filed a Chapter thirteen.  

You can avoid these agencies all together by simply managing your money right.  Self-Help may be the Best Help.

 

* [[Debt Relief: Survey SAMPLE|Survey SAMPLE]]

* [[Debt Relief:Bibliography | Bibliography]]