Life After Bankruptcy

Eliminating debt is on the forefront of everyone’s mind these days. There are dozens of different strategies and methods of debt elimination you can try, however only one strikes fear in the hearts of most consumers- bankruptcy. Known as the last resort, the final option, the “worst case scenario”, bankruptcy today is much different than it was a few years ago. No longer having the option to completely wipe the slate clean and start over, more people are thinking twice before filing for bankruptcy. That being said, bankruptcy is in fact the best option for a select number of consumers and contrary to popular belief- there is life after bankruptcy. Before you consider this drastic option, first understand what will happen when you file and what you can anticipate in the years to come.

What Is Bankruptcy?

Bankruptcy is a legal process where the person filing the request declares their inability to repay their debt as it currently stands. The two most common forms of consumer bankruptcy are Chapter 7 and Chapter 13 bankruptcies. When an individual files for a Chapter 7 bankruptcy it is often referred to as a liquidation which basically allows debtors to give up assets that are not exempt. These assets will be sold or returned to creditors in lieu of repayment. In a Chapter 13 bankruptcy, the person filing agrees to restructure their debt in a way that allows them to repay part of all of the debt under new and often longer or more forgiving terms. Your ability to repay your debt today and in the immediate future will determine which type of bankruptcy is right for your situation.

Life After Bankruptcy.

There is no denying the fact that life after bankruptcy can be difficult in terms of personal finance. Lenders will be less inclined to extend credit due to your history of not repaying loans per the original agreement. This poses an increased risk to lenders who are already leery of loaning money in a shaky economy.

When you file for bankruptcy, it will appear on your credit history for at least ten years. In addition to potential problems with lenders, you will also have to honestly answer the question, “have you ever filed for bankruptcy?” which appears on numerous applications for things other than credit. This may impact your chances of getting a job or approved for a number of other things in the future. When and if you qualify for credit in the future, you will undoubtedly see higher interest rates and less favorable terms than your peers who have not filed for bankruptcy.

As you can see, there are many negative consequences associated with filing for bankruptcy. The one positive that makes it worthwhile for qualifying individuals is the prospect of getting back on track financially and finally getting out from under an unbearable amount of debt. If you have exhausted all other options for debt elimination and find yourself in a position where you may never get out of debt without help, bankruptcy may be the best option for your situation. If this is the case, understand that you can repair and rebuild your credit in time. It is a long and often difficult journey, nonetheless, one worth taking if you can avoid the problems that got you in debt in the first place in the future.

Money Management Tips For 2010

People who have wrestled with long standing debt often find themselves facing an unsure future once that debt has been paid off. The reason for this dilemma is the fact that most people who have been dealing with debt for months or even years have no idea what to do with that “extra” cash that is now available in their budget. If you are recently debt-free and not sure how to proceed in the future, the following tips can help you manage your money in the recovering economy.

• Debt- Anyone who has successfully paid off high interest debt (or those currently in the process) understands how long and frustrating the journey can be to debt-free living. With that being said, it is imperative you remember that journey as you move forward in the future. It is true that many people end up in debt for reasons beyond their control, however the rest of the population can usually blame only themselves and poor money management. Avoid future debt whenever possible and tread carefully with credit cards in the coming months. New regulation that will be in place in 2010 should provide some protection to consumers, but those who have historically had trouble managing credit should avoid incurring debt regardless of new rules.

• Savings- Debt is the four letter word that often stands between financial independence and living paycheck-to-paycheck. Once debt has been eliminated, consumers have to deal with an infusion of cash in their daily budget. Do not waste this opportunity to build your savings. The current economy is not offering high yields for savings right now, however this should not discourage you from shopping around for the best interest rate offered for traditional savings accounts. After building an emergency fund, you may consider short term CDs or other savings vehicles that do not tie you into long term commitments. Opportunities for better interest rates are likely right around the corner as the economy improves in upcoming months.

• Rebuild your credit- As consumers and lenders alike gain confidence in the recovering economy, a good credit score will be necessary should you need to borrow money to buy a home or automobile. Take steps today to begin the long process of rebuilding or improving your credit history and credit score. This will help set you apart from the rest of the pack in qualifying for more lucrative terms and conditions for future loans.

Everyone is struggling to find level ground in the wake of the recession. Fortunately all signs indicate the recession is in fact over, however that does not mean things will immediately go back to “normal”. It will likely take many months or years in some cases for consumers and businesses alike to feel confident in the economy. By following these tips you can feel comfortable that you are on the right path the long term financial security.

 

 

Yes, Debt Consolidation Will Affect Your Credit Score

It used to be that debt was a hush-hush subject that no one liked to talk about aloud. However, in light of the recent economic instability and the surge of consumers losing their jobs, homes, and life savings, it’s no longer a taboo subject. Debt is discussed and is a much sought-after subject and affects many more people than we might have even realized. It is no wonder that more and more individuals are now seeking the help of a credit counselor or debt consolidation company to help them dig out from under weighty financial problems.

Debt Consolidation is An Option
Debt consolidation is a popular option for consumers to lower the total amount owed, making debt issues become resolved faster and more efficiently than if no debt options were used at all. Debt consolidation involves the individual or a third party negotiating with creditors to eliminate penalties, lower interest rates, and negotiate a lowered monthly payment for all debts the consumer incurred. At the end of the consolidation term, you are essentially free and clear of your debts that were consolidated. Most creditors will agree to such negotiations in an effort to avoid you filing for bankruptcy, which in turn would net the creditor nothing.  However, while resolution of the debt is good for you and your finances, it may not always be kind to your credit.

What Happens to Credit Scores Immediately?
Unfortunately the debt negotiation process is not one that will be over and done with in a single day. While your debt is negotiated, your open balances are still required to be paid. If you can not afford the monthly payments, creditors may begin suspending or closing your accounts. If you are late on payments or miss them entirely, your credit score will take another hit. This may continue to happen for the first few months until your account can be reported as being back on track once you have paid regularly for a few months through the consolidation program. Additionally, the closed accounts will alter your debt to credit ratio which can also have a negative influence on your loan.

What Happens To Credit Scores In the Future?
Since the process of debt consolidation negotiation can take months to complete, your credit will suffer for a bit during the down time. Once the process is well under way and you are making regular payments as per your agreement, you may start seeing an increase in your credit score, proof that your accounts are back on track. As you continue to have good payment history information reported back to the credit bureaus, your credit will continue to improve. If you learned a lesson and adopt better money management habits after you’ve considerably reduced your debts, you can continue to up your credit score and eliminate other debts on your own.

How You Can Negotiate Lower Interest Rates on Your Credit Card

There are billions of dollars in fees and interest charges generated every year for credit card companies but those same fees are costing you hundreds of dollars or more as the owner of a credit card. As the competition becomes even more fierce among credit card companies, there is more incentive for your credit card company to keep you as a customer. Because of this reality, you as the card holder may have a bit of power over how much interest and fees you shell out each month to the credit card company.

Many consumers do not realize they have some power to be able to renegotiate the interest rate of their credit cards so they continue to pay as they are told. But for anyone who is working on a stricter budget and looking to cut costs, you should get in touch with your credit card company now and see how far they are willing to go. Before you get on the line, there are some things you should know that can help you succeed with your interest rate renegotiation. Here are some tips for getting a lower interest rate:

Check Your Payment History First
If you have been a late payer or have missed credit card payments in the past, you will not have the pull to renegotiate much. Make sure you have paid on time consistently as credit card company will be more flexible with a good, solid customer.

You Want the Lowest Fixed Rate
Introductory rates can be very attractive but they are not realistic for the long term. When you are asking for a better interest rate, be sure to ask for the lowest fixed rate. Introductory rates will only last for so long. It’s the rate that you have afterwards that is the most important.

Generate An Offer
Check into the prime rate around the country. Your credit card company may not be willing to go that low but if you can talk them in to around 10%, you’ll still be better off than if your rate was 20% or higher.

Don’t Attack
When you are negotiating for anything you need to remain logical and cool-headed. Threatening company representatives will get you no where fast. You need to simply explain that you have has a better offer from another credit card company than ask what they can do to remain competitive.

Don’t Threaten
Many people will threaten bankruptcy to plead their financial hardship situation. But this is not the right approach because it only presents you as being a financial risk. Unless you are really danger of bankruptcy, do not threaten any negative actions just to get a lower interest rate.

Don’t Blow Smoke
If you do not get anywhere with a negotiation but still have no concrete plans to go anywhere, don’t say that you do. If you are ready to move on to another company and have shopped for a better deal, then feel free to mention you’ll be taking your business elsewhere. If you do plan to close out the account, be sure you are able to pay off the balance in full and are prepared to never use the card again.

You can successfully renegotiate many credit card interests rates these days but it is up to you to do it with the proper etiquette and preparation. The savings you can get for yourself will be worth the time you spent getting ready for the negotiation.