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Relief From Debt
June 29, 2009 by DebtGeniusNo Comments Tweet this post
Relief From Debt
Condition Of Your Credit
You need to know the extent of your credit problems before you can make a decision. Your first step is to obtain your credit report from all three of the credit bureaus, Experian, TransUnion and Equifax. Each will give you a clear understanding of your situation. Also, since one of every four reports contains serious errors according to a recent survey, check each report for errors and report them to the companies. Each of them will also provide you your credit score, the companies’ measure of your creditworthiness. Generally, a score of 600 or less will wave the red flag to many lenders. You can ask for your free report every year from all three companies, but you may have to pay for your credit scores.
Consolidation of Your Debts
To get through a financially difficult time, a bill consolidation loan may help by reducing the total amount you are paying on your bills each month. A loan of this type will help you pay off your debts, and its monthly payment is less because the loan has a longer term. If necessary, you could secure a consolidation loan with a second mortgage on your home, but understand that if you are late with your payments, there is a chance that your lender will foreclose on your home.
Negotiate Reductions With Your Creditors
If you file bankruptcy, your unsecured creditors will probably receive little or nothing from what you owe. Therefore, they are anxious to help you make it through difficult times. Approach them with your story, and they may either reduce your principal and interest until you are back on your feet, or give you additional time to get caught up. On the other hand, if you are having difficult with the payments on your secured debt such as a car or home loan, the lenders would like to avoid repossession or foreclosure because they would then have to sell your property. Therefore, they should be amenable to helping you, as well.
Debt Counselors
Millions of people have engaged the help of credit-counseling companies who provide them with valuable services. First, they are equipped to negotiate for you with your creditors. Furthermore, they will provide you with a workable budget and see to it that it is carried out. Finally, they will enable you to make a single payment each month with which they will pay down your debts to various creditors. Expect to pay a credit-counseling firm about 12 percent of the amount you owe. Check with your local Better Business Bureau for information about credit-counseling companies in your area.
The Last Resort: Bankruptcy
You may have no other recourse but to file bankruptcy, but the federal government made it more difficult when it passed new laws in 2005. For example, you are now required to attend financial-counseling courses before your bankruptcy is released. Also, you must pass the so-called “means test” to qualify for Chapter 7 treatment. The “means test” requires that your income be below the median income established by your state. Finally, a Chapter 7 bankruptcy will remain a part of your credit history for up to 10 years, making it difficult for you to secure credit.
Warning
During difficult economic times, the number of people experiencing debt problems rises. With that increase, many fraudulent companies are established to take advantage of those people. Before you choose any company to help you with your debts, be sure to check them out thoroughly.
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Filed under Debt Management, Debt Relief, Information on Personal Debt
Tags: Relief From Debt
