Still Got Credit Card Debt? Here’s How to Reduce It

Credit card debt became a huge topic of discussion over the last few years. Mainly, the credit card industry’s propensity for allotting credit lines to people who genuinely could not afford them caused massive chaos in the industry. This chaos led to cut or eliminated credit limits without notice as well as a dramatic increase in people’s interest rates. Many families could barely make ends meet with all of the rising debt.

Luckily, it seems that many in the nation began to take a real interest and dedication to paying off debts and getting their financial house in order. With credit cards becoming harder to get nowadays, it is wise for people who already have cards to keep them in good standing by paying off balances each month and spending wisely on credit.

For those who still find it a struggle to eliminate credit card debt, there are steps you can still take to find relief. Here is the top tips for paying down plastic debt and eliminating it entirely:

Stop Spending
If you find it too difficult to come up with even the minimum required monthly payment, stop spending immediately. Living on your plastic line of credit is a sure-fire way to stay deep in debt. If you can’t pay for something in cash, don’t buy it. If you are living day to day on credit, seek out a second source of income immediately.

More Than the Minimum
When constructing your monthly budget, make a point to include more than the minimum amounts for credit card accounts. If you begin to expect having to pay more a month through planning, the faster you can pay down the debt. Pay as much extra as you can afford but stick with the commitment to paying more every month, not just when you feel like it. By using this tactic, you can essentially cut years off of your debt payments and improve your credit score at the same time.

Shop for a Better Card
If your credit score is still in good standing but it is getting harder to meet even the minimums, start shopping for a card with lower interest rates. During the recession months, many credit card companies shot cardholder interest rates through the roof. Where once was a 9% rate, there soon was a 25% rate. Now as the industry is trying to rebound, card companies are trying to woo new customers. Check out the many online comparison sites and then transfer your balance to a lower interest card.

Get On the Phone With Creditors
Now that some of the drama in the industry has died down, consider contacting your creditors and ask them for lower rates. They may not want to risk losing you if you have been great about payments in the past. Many will be willing to work with you by renegotiating your card terms.

Find Alternative Sources for Funds
If credit card balances are quickly spiraling out of control, you may need to borrow cash from other resources. Your 401k, life insurance, and savings are all viable sources for cash. You may also investigate a home equity loan to pay off all debts. There are several places you may be able to turn for extra cash, but do so with extreme caution because you can end up losing more than you bargained for by not considering the consequences.

Take Charge Of Your Debt

With a few exceptions, everyone has at some point found themselves dealing with debt. Whether due to a poor money management or some unexpected hardship, debt has a way of taking over your live and wreaking havoc on your personal finances. How you handle the situation will be the deciding factor in whether or not you regain control of your life or allow your debt to take over. Your actions in dealing with debt will lay the groundwork for your entire future, therefore it is imperative you make the right choices despite challenging circumstances. Here we look at ways you can take charge of your debt and change your financial future.

• Face debt head on- Once you have gotten over the initial shock of discovering you are really in over your head, it is time to regroup and develop a strategy to fix the situation. As is often the case, debt has a way of slowly creeping up on you until you reach the point where denial is no longer an option. Once you acknowledge that you have a problem it is time to take action to remedy the situation.

• Gather information- The first thing you must do is gather all of your financial information to get a realistic picture of your situation. You will need information on your income and outstanding debts. This should include credit cards accounts, mortgage or car notes and any other delinquent bills. While it is frightening to add up the numbers you must find out exactly where you stand in order to develop a strategy to eliminate your debt.

• Research options- There are dozens of debt relief options available, each specifically designed for specific situations. Before you jump on the first chance to get out from under your debt, research all options to ensure you are picking the strategy that is most likely to work with your situation.

• Develop a strategy- Now that you have all the information needed to make a sound decision on what your next move will be, it is time to get your strategy in place. Depending on your level of hardship you may be able to eliminate debt on your own or you might have to seek additional help. Whenever the option is available and realistic to your circumstances, it is ideal to pay off your debt on your own with aggressive payments to creditors. If this is not an option you can then consider debt consolidation, credit counseling, debt negotiation or in the worse case scenario bankruptcy.

The key to successfully eliminating debt is understanding your personal situation and the pros and cons of all debt relief options. Eliminating debt is not an option, it is something that has to be done in order to experience financial freedom and begin working toward other goals.

Desperate To Escape Debt?

When you are facing a debt burden which seems impossible to tackle you will likely feel many emotions, one of which is desperation. This is a natural reaction as most consumers do not wish to live in debt and find the situation nerve wracking and stressful. When you begin to see the bills pile up higher and realize you need a financial miracle to get back on track it is easy to become overwhelmed and desperate for any source of relief. Unfortunately many companies are more than willing to take advantage of your state of desperation, promising an easy-out to an impossible situation. They use savvy marketing which often fails to point out the dangers of many debt elimination methods that can cause more harm than good in the long run. Here are a few tips to avoid falling victim to a scam or process that isn’t right for your situation.

• Get your head out of the sand- Simply put, most people begin to avoid dealing with their debt when it becomes obvious you do not have the resources to pay the debt collectors. While this is a common reaction, it is not one that will help you resolve your financial problems. In order to fix the situation you have to face the music and find out exactly where you stand. Ignoring your debt will not make it go away and sooner or later you will have to face the consequences. By taking stock of what and who you owe you can determine what steps you can take to begin eliminating your debt.

• Education- We are not referring to formal education, rather taking the time to research and understand how debt affects your life, long term financial goals and ability to live comfortably. Many people get stuck in the cycle of debt because they don’t understand the basics of credit and debt. Learn the basics to take the first step toward financial freedom.

• Proceed with caution- You need only pick up a newspaper, turn on the television or listen to the radio to find yourself bombarded with advertisements which promise to help you get out of debt. The advertisements always make promises to “fix” your problem but few mention the realities of the process they are selling. Each debt elimination method beyond paying your debt in full, on your own has pros and cons which must be carefully weighed and considered before moving forward. There is NO easy answer to eliminating debt, therefore you should always proceed with caution when considering a debt elimination strategy.

Eliminating debt can be a scary process, however living with debt is much more frightening. Whatever your current situation, take the first step today toward living a life free of debt. Once you get the ball rolling, you might be surprised how much easier it is to “deal” with debt versus letting it continue to control your life.

Can Bankruptcy Stop Foreclosure?

With so many people struggling with debts and home foreclosures around the nation, many wonder what can be done to stop both the cycle and harassment debt brings as well as save their primary homes from being foreclosed upon. Homes are being foreclosed because homeowners are having more trouble making payments regularly due to job loss or simply having too many debts. When a mortgage note is late or missed too often, the creditor may consider the loan in default and start foreclosure proceedings. When this occurs, the full balance of the mortgage note is due immediately. The mortgage lender will also likely refuse to accept monthly payments from a homeowner.

The Foreclosure Process

Once foreclosure on a house begins, a letter of foreclosure will be mailed and the homeowner will either have to pay the full balance or file bankruptcy so the foreclosure can be stopped. If a homeowner  intends to use bankruptcy to stop foreclosure on a home, they will have to file their bankruptcy case prior to the date of the foreclosure sale.  If you choose to file for Chapter 7 bankruptcy, all of your assets will be placed in the care of a bankruptcy trustee who will decide what can be liquidated and what debts remain will be discharged. Your family home/primary residence can not be liquidated. If you file Chapter 13 bankruptcy, you can continue to make your regular payments on the home while you also use the bankruptcy’s repayment plan to catch up on your past due payments. Bringing your loans current will help save your home.

It is advisable that when facing foreclosure that you contact an attorney who is experienced in bankruptcy law to help guide you through your options. Once you realize you may be having difficulties paying your house note, you should contact your mortgage lender to see what your options are, if any. Bankruptcy should be used as a last resort. It is hard on your credit score and can take a long time to recover from financially. But bankruptcy will help you if you are suffering from extreme financial hardships and unable to continue paying per the terms and conditions of your original credit agreements. Filing bankruptcy should be a last resort to get out of debt. Unless you are in immediate danger of losing your home, you can try other debt management programs to get you back on track.
Consult with your lender about other options available for saving your home from foreclosure before looking at bankruptcy.

Some other options you have for preventing foreclosure are:

• Refinancing
• Modify terms of the existing mortgage
• Renegotiated payment plan
• Give up the homeowners

What Are The Types of Bankruptcy?

For many, bankruptcy is the last option for eliminating overwhelming debt. Because bankruptcy leaves a long lasting (10 years) mark on credit histories and scores, it is only advisable to go into it knowing all of the details and the consequences. It is recommended that you speak to an attorney before going forward with a bankruptcy filing. Understand that bankruptcy will limit your abilities to borrow money or get credit in the future. It should be considered a last resort to debt elimination and should be understood that bankruptcy is not the easy way out of debt. Bankruptcy courts can make the decision as to whether or not you are eligible to file. Again, bankruptcy is a major decision that should not be taking lightly.

There are four basic types of bankruptcy we will discuss here as it relates to personal finance.

Types of Bankruptcy

Chapter 7
This type of bankruptcy is essentially a liquidation bankruptcy, meaning that all non-exempt assets of the debtor are sold in order to repay as much of the debt as possible. Whatever can not be paid through the liquidation will be discharged. Chapter 7 bankruptcy can be used by individuals, partnerships, and corporations. Typically businesses will refrain from filing Chapter 7 because they will no longer be able to conduct business as usual.

Chapter 11
This type of bankruptcy is the most complex of all bankruptcies. Both businesses and individuals can file for this type of bankruptcy, though it is most common for businesses to file. During a Chapter 11 bankruptcy, you continue maintain control of your assets but you will be involved in a reworking of your debts in attempt to pay off creditors in full. In the past, debtors had an unlimited amount of time to repay the debts but after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, debtors must submit a reasonable repayment plan with 120 days or risk having the creditor submit their own plan for repayment to the bankruptcy court.

Chapter 12
This type of bankruptcy is specific for farmers. They can file bankruptcy but retain control of their assets while working through a creditor repayment plan to pay off all debts.

Chapter 13
This bankruptcy is similar to Chapter 11 but it is specific to individuals. The filer will still be in control of their assets but a repayment plan, usually based on a three to five year repayment plan. Portions of the total debt may be discharged but that determination will be based on the debtor’s income. Chapter 13 bankruptcy also places limits on the amount and type of debts that can be involved.

How Does Debt Consolidation Work?

When you are faced with obligations to several creditors and can no longer manage to keep up with your payments, debt consolidation is one of your options. While it may not be the best solution for everyone, it certainly can help you manage and reduce your debt faster and more consistently than if you were to do it on your own.

So how does debt consolidation work?

Debt consolidation is done by a debt consolidation counselor. They will want to have a list of all your debts and creditors information. You will also need to provide all of your income information. The counselor will then contact all of your creditors and negotiate to lower interest and finances charges, stop fees and penalties, and ward off collection calls from creditors. Most creditors will be agreeable to working with the consolidation program. Since so many consumers are in debt, the creditors would rather be assured they will be getting their money rather than risk you filing bankruptcy.
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Debt Settlement USA Review

Incorporated in 2003 Debt Settlement USA, Inc. is a debt settlement company based in Scottsdale Arizona.  This company offers debt settlement services to clients who are struggling with large amounts of debt and looking for an alternative to bankruptcy. Their website claims they are “arguably the most effective consumer debt reduction program in the nation”.

Here are some quick facts about Debt Settlement USA:

Company Founded:- Original start date 9/1/2001; incorporated in 2003

Years In Business:- 7

Number of Employees:- unknown

BBB Rating:- F

BBB Complaints:- 135 complaints in last 36 months

Fee Information:- unknown

Escrow Available?:- yes

Source of Funds:- client payments

Fee Structure:- unknown

Avg. % Settled:- 40%-60%

Refund Policy:- unknown

Minimum Debt Required:- $12,000 total unsecured debt/$1,000 per creditor

About the Company:

Debt Settlement USA has a current rating of F with the Better Business Bureau. The reason for this rating is due to the number of complaints and concerns about the industry which they operate. The areas that received the most complaints were customer service issues, service issues and contract disputes. For more detailed information you can view the BBB report here. This company is a member of the International Association of Professional Debt Arbitrators. They are a 2009 member of the U.S. Chamber of Commerce, a business federation representing businesses, chambers and industry associates.

The Program:

Debt Settlement USA offers clients the standard debt settlement program. When you enroll in their program they will negotiate with your creditors in an attempt to secure a settlement offer less than the balance you currently owe. After reviewing your financial situation, Debt Settlement USA will set up an affordable monthly payment which you place in a settlement account. These funds will be used to pay creditors when settlements have been negotiated.

Website Experience:

Debt Settlement USA offers visitors or customers a website that is fairly standard in the industry. They cover most of the necessary information relating to debt settlement. When compared to other websites I would say the experience is average. From a strictly visual perspective, the site lacks some of the bells and whistles of other companies I have reviewed, however the information they do provide is easy to understand if not completely forthcoming. Consumers unfamiliar with debt settlement are encouraged to do their homework before enrolling in any program. I was unable to find any fee information on the website which is disappointed as the language implies the “cost” of the program is based entirely on the clients debt, ability to pay and so on. Obviously they are not going to work for their customers free of charge so it would be nice to see some information on how they collect their fees. In my opinion the information is slanted to “sugar coat” the possible negative effects this process can have for consumers. In addition to information about the company and process, the website offers customer access for clients as well as articles and a blog for further information.

How Does Debt Consolidation Work

Debt consolidation is the general term used for the process of combining all of your debts into one single payment per month, typically at a lower interest rate than you had been previously paying. . Instead of having to contend with making payments to creditors on an individual basis, consolidating your debts allows for faster repayment time and much less work to be done to becoming debt free.

Some individuals will attempt to go at debt reduction on their own but find that negotiating with creditors to lower interest rates, stop fees, and change the terms and conditions of the original creditor agreement is just not possible with some companies, who are relentless in demanding payment. Consolidation may be the best choice for you. There are several ways you can consolidate your debts. Some of the most common methods include:

Do-It-Yourself Method
If you are looking to consolidate your debts and your credit is still good, you can opt to take out a loan to cover the entire costs of your debts. With the money your receive from the loan, you pay off all of your outstanding debts, leaving just one note to pay each month. Many people choose to borrow money against the equity in their homes or from other investment source. It is not almost the recommended approach for paying off debt but each individual must weigh the pros and cons from their own financial  perspectives.

Professional Consolidation Services
There are companies that specialize in working with you to pay down your debts. There are two major advantages to working with such companies. Number one – once you have contracted with a consolidation company, most creditors will deal with the company directly, preventing incessant debt collectors from contact you for payments. The second advantage is that consolidation companies will work with creditors on your behalf and in many cases can negotiate lower interest rates and the stoppage of fee accrual. Debt consolidation companies operate differently and as the debtor, it is your responsibility to find the right company for you. The consolidation plans will also differ but for the majority of plans, the theme is the same. You combine all eligible debts into one plan and make a monthly payment to the debt consolidation company. The company will then make the required payment to your creditors. This method will not only help you manage your payments and keep you consistent, it will also pay down your debt much faster (as in years faster) than if you were to continue making minimum payments on your own. Consolidation companies do have their drawbacks such as there are often somewhat high fees that go along with your regular payments. However, if you get a full understanding of how the consolidation plan will work, there should be no major surprises.

Debt consolidation can be a great resource for you to improve your debt situation. Choosing this option may help to prevent the need to file bankruptcy and will assist you in becoming debt-free instead of struggling under the weight of your bills.