In today’s unstable global economy, people are often looking for ways to ease the financial burdens on their bank accounts. Many families are stretched to their limits with credit card debt, student loans, and inflated mortgage rates, and are looking for ways to cut costs anywhere they can.
For some, it means clipping coupons, eating in instead of dining out, and carpooling to save on soaring gas prices. For others, there is no way to cut costs any more than they already have. In this case, filing for bankruptcy may be the only means of debt consolidation available. While filing bankruptcy is not a decision to be taken lightly, more people are choosing to file bankruptcy than ever before. Many states require people who are considering filing bankruptcy to meet with credit counselors. These credit counselors evaluate each person’s finances, and goes over all viable options. Bankruptcy is a last resort, and only used to keep a family or individual afloat, rather than an easy bailout. That being said, when a person does file bankruptcy, there are several options.
Most families and individuals file Chapter 7 bankruptcy. This allows people to hold onto necessities, such as a home or a car, as long as they are in decent standing with those particular creditors, or the creditors are willing to work with the individual to maintain their creditor/debtor status. After a bakruptcy is discharged from U.S. Bankruptcy court, the debtor then, essentially, as a clean slate.
Credit card debts are for the most part, wiped out. It offers many people a fresh start after making credit mistakes in the past. While it sounds like an easy solution to clearing debt, many people don’t fully recognize the repercussions filing bankruptcy will have on their long-term credit. It becomes difficult to rent an apartment with a bankruptcy on your record. And establishing any new credit becomes extremely difficult. For some, it’s not necessarily a bad thing to not be allowed to extend credit.
For others, it is a painstaking struggle to buy necessities such as furniture, or even get a loan for a vehicle without sky-high interest. Certain credit agencies will review credit for as far back as ten years. So a credit mistake you may have made as a single 18-year-old could still be having a significant impact on you as a family 10 years later! For many people the only way to help consolidate their debts is to file bankruptcy. However, filing bankruptcy is not always the best option for every individual, and is seldom the easy way out. Each person’s credit should be evaluated, as well as debt to income ratio, to determine if filing bankruptcy will be beneficial to you in the long run.
When it comes to credit cards you’ve got to be very careful. Because credit cards are so convenient and so widely accepted, getting yourself into trouble and over your head can quickly become a problem, even for the most cautious consumers. In no time you can easily find yourself in need of credit card debt help. If that’s your situation there are a number of options available to you, so let’s take a few moments to get an idea of exactly what types of credit card debt help might be best for you.
Credit Card Balance Transfers
You may find that a credit card company offers you a credit card at a lower annual percentage rate than other cards you already have with existing balances. For example, you may have two cards with interest rates of 17.5 percent and 19 percent, and each may have a balance of $1,200. A new card offer might give you the considerably lower rate of 12 percent, so transferring your $2,400 in balances to the new, lower-rate card would make sense. However, you should make certain that the new rate is not only a short-term promotional rate. In many cases, these low rates have an expiration date at which time the rate will increase. If you seek credit card debt help through the balance transfer option, make certain you know when the promotional rate expires and what the subsequent long term rate will be.
Debt Consolidation Loans
Many people think that a debt consolidation loan is the best way to get long term credit card debt help, but that isn’t necessarily the case. There are a number of issues to be concerned about when considering a debt consolidation loan. In many cases a loan might significantly reduce your overall monthly payment, perhaps even to as little as half of what you’re currently paying, but this reduction in monthly payment can come at a price — a higher overall annual interest rate. How can a loan at a higher rate reduce your monthly payment? By stretching out the payments over a much longer period of time. In the end, you actually pay much more in total payments than if you’d have simply stuck with your credit cards.
Credit Counseling Agencies
If you seek credit card debt help through a credit counseling company, they will work directly with your creditors to reduce your interest rates and, in some cases, your actual principal balance. Rather than pay off your credit card companies completely, the agency will collect your payment and distribute the funds to the lenders under an agreement that they negotiate. For their service, the agency will receive a fee, either from the consumer or from the creditors. Either way, using credit counseling for credit card debt can keep your accounts in good standing with your credit card companies while reducing the total amount you have to pay each month.
If you’re in need of credit card debt help, consider the advantages of disadvantages of three common solutions: credit card balance transfers, debt consolidation loans, or credit counseling agencies.
Credit card debt can sneak up on you and cripple you financially. But remember, you are under contract and avoidance of payment will only delay and worsen the financial outcome. In the event, you should decide not to repay your credit card debt, you can expect to hear from the company. Sure, after sending a few monthly statements and numerous threatening collection letters, there may be silence. This is when you are truly in trouble.
The silence is a transfer of the debt to a collector who will track you down and seek retribution for the outstanding debt owed. You can continue to ignore such efforts and depending on the amount owed the collector may go silent or begin to speak about legal actions.
Should the collector just disappear and it seems as if the debt never existed it is safe to assume the debt was charged off. This doesn’t mean you don’t owe them, it just means the amount is not worth investing in the process of collecting it from you. Your credit report will reflect this charge off and obtaining credit in the future will be difficult until you resolve the issue.
A legal motion to appear in court may be delivered certified mail to you as means of having the court order you to repay the money borrowed. At this point, garnishing your wages may become real and liens upon your current assets possible.
Work out an arrangement with the company you owe. Not paying will have severe consequences to which you may regret for many years to come.