Debt Relief Tips

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Can I negotiate my own debt relief plan with creditors?

Negotiate Your Own Debt Relief

You can negotiate your own debt relief plan with your creditors if you want, just follow the steps below: • In a fresh spiral bound notebook, make a list of your total household income. Include everything. Your pay (and your partner's if you have one). Child support if you get it. Disability payments—anything and everything that you receive on a regular basis. • Make a list of your reasonable living expenses (for example, rent or mortgage, food, utilities, clothes, personal hygiene, insurance). The difference between your total income and your total expenses, excluding your debt, is what you have available to devote to paying off your debt. • Make a list of all your debts, including the total amount owed, the minimum payment, the interest rate, and the contact information. • Figure out how much you can realistically pay each creditor each month and call the company to see if they will agree to the plan. Ask to speak to a supervisor. • Tell the supervisor that you are having difficulty paying your debt, that you would like to pay the debt but on different terms, and that if you are unable to negotiate an agreement, you may be forced to consider bankruptcy (in which case the creditor may get nothing). • Request that the company agree to stop charging late fees, that it stop charging interest, and that it agree to accept the proposed amount as payment each month. • Get the name, e-mail, telephone number and address of the individual with whom you are speaking. • After you have reached agreement, immediately send a written confirmation of the conversation detailing the terms of the agreement—and then stick to it. If this sounds like more than you are up to, contact a credit counselor to help you. You can reach the Consumer Credit Counseling Service by calling 1-800-388-2227.

Will setting up a debt management plan affect my credit?

Finding a Credit Counselor

You've had it. Your bills are stacking up. The collectors won't stop calling. You need debt relief tips, advice, and help. You need a debt relief solution now! And that's just what a debt management plan can offer. But will it hurt your credit rating? It's true that debt management plans will show up on your credit report. However, more so than ever, that information is being viewed more as a positive than a negative. After all, at least you're making payments and shouldering your responsibility, right? Participating in a debt management plan will make it harder, at least for a while, to get new credit. In fact, some debt management plan administrators insist you agree not to apply for new credit for the duration of the repayment period. Of course, if you are already so far in debt that you need a debt management plan, you really shouldn't be taking on additional debt anyway.

What happens if I declare bankruptcy?

Bankruptcy: No Clean Slate

Each year, more than 1 billion people file bankruptcy according to the American Bankruptcy Institute. While some are credit abusers trying to escape their responsibilities, most are normal, everyday, hard working people who have hit upon hard times. The loss of a job, medical bills, or a divorce may be all it takes to tip the scales. Bankruptcy does give debt relief by wiping your debt slate clean, but it is not something to be done lightly. Chapter 7 bankruptcy is used by most individuals. Bankruptcy is a federal court proceeding. From start to finish, it can take anywhere from four to six months. It is almost always necessary to hire a lawyer and may cost you as much as $1,000 in legal fees and other fees. Once you start the process, you may not be able to stop it. While the law does allow you to keep certain basic rights to property in most cases, you may lose the right to keep or use your car, your home, or other personal property depending on your circumstances. Also, if anyone co-signed your loan or credit card, they remain responsible for the debt and will become the target of collection efforts if they haven't already become so. To learn more about bankruptcy and whether it is right for you, visit the American Bankruptcy Institute Web site's consumer education center.

What are my debt relief options?

Debt Relief Options

Some common debt relief options include home equity loans and lines of credit, borrowing against a retirement plan, transferring debt to a lower rate credit card, and setting up a debt relief plan through a credit counseling agency. No single option is right for all people. Debt relief options vary depending on a bunch of different factors. Home owners can borrow against the equity in their home. Renters can't. Someone with a 401(k) plan can take a low rate loan against it to pay off their high rate credit cards. People without retirement accounts can't. Someone with good credit can get low rate credit cards while someone with bad credit will be stuck with the high rate cards. There may be options you haven't even considered but that, with the help of a credit counselor, will be as plain as the nose on your face. The one thing we all have in common when it comes to debt relief is that the best approach is a big picture approach rather than a Band-Aid approach. In other words, you don't want to solve the financial crisis of the day by creating a worse one tomorrow. If you need to get your car fixed to the tune of $300 but you won't have the cash until Friday, don't charge the payment on your 29-percent interest credit card on Tuesday. That's a Band-Aid fix. Instead, see if the shop will take a post-dated check. Carpool to work with a friend. Take public transportation. Or ride your bike. If your kids need to miss a couple soccer practices, that's life in the fast lane—or not.

Should I consider bankruptcy?

Bankruptcy: A Last Resort

Personal bankruptcies are at an all-time high in our debt-laden society. But, is bankruptcy the right answer? Even though a debt-free future is the stuff daydreams are made of, a bankruptcy could end up costing you more in the long run. Besides which, recently enacted legislation has made it harder for people to shed debts by declaring bankruptcy. Before deciding bankruptcy is the solution to all your problems, you should sit down with a certified financial counselor to sort your debt out. If the advisor thinks you can realistically get out of debt within five years, you will be offered a debt management plan. If you agree to the terms offered by the credit counseling agency, you will pay the agency a lump sum and they will pay your creditors. If you are in so deep the counselor doesn't think you can dig out within five years, you may well be told to file for bankruptcy. However, keep in mind that bankruptcies will stay on your credit report for up to seven years and you will likely pay higher interest for any credit you take out after the bankruptcy. Chances are your situation is not as grim as it feels to you. Get a reality check by visiting the National Consumer Credit Foundation's Web site for information on credit counseling, filing bankruptcy, budgeting, and paying off bills.

Can I get credit in the future if I declare bankruptcy?

Credit After Bankruptcy

Debt Relief Tips: A bankruptcy will stay on your credit report for up to ten years, so if you can find some other legitimate means of consumer debt relief, you should probably try that first. However, if after careful consideration you decide to file for bankruptcy, don't despair. There are specific laws that prevent discrimination against someone who has filed for bankruptcy. You can't be denied housing or a job because you filed for bankruptcy, for example. You will be able to get credit again in the future. It may not be as easy, and it almost certainly will be more expensive, but you will be able to apply for and get credit again. Take the following advice: • Demonstrate a steady work history and signs of financial rehabilitation. • Open a savings account, and get a secured credit card. • Don't apply for a bunch of credit cards, either, as each application actually lowers your credit score whether you are accepted or not. • Make regular on-time payments. • Check your credit report regularly to make sure those on-time payments are being reported so you get credit for them. Credit reports can cost up to $20 a pop, but a recently enacted law makes it possible for U.S. citizens to obtain a free copy of their credit report from each of the three major credit reporting agencies once each year. You can request one report from each agency every four months and keep a handle on what's being reported for free. You can order your free annual credit report online at, by calling 877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

What is a debt relief plan?

About Debt Relief Plans

Consumer debt relief is big business, and don't you forget it. For every legitimate, nonprofit certified credit counseling agency out there, there are fifty more scam agencies who will woo you with claims of lowering or eliminating your debt—for a fee, of course--sometimes as much as thousands of dollars. These companies will promise to cut your debt in half by negotiating lower payoffs with your creditors. Or they promise to get your creditors to add a comment that the debt was "paid in full" to your credit report. The truth is that while your credit card companies might agree to accept half of what you owe them, you may end up having to pay income tax on the amount they write off. Plus, even though your credit report says "paid in full," a notation that says, "credit not paid per agreement" remains on your credit report. Debt relief tips are easy to come by, however, the only true debt relief plan is a debt management plan set up by a certified credit counselor—or by you. If you have the wherewithal, the organizational skills, and the follow-through to stick with the plan, you can contact each and every one of your creditors and negotiate your own debt repayment plan potentially saving yourself thousands of dollars in fees, avoiding IRS liability, and improving your credit report as you make consistent, on-time payments and build your self-esteem while you whittle away your debt.

Will all my debts be wiped clean if I file bankruptcy?

Paying Off Credit Card Debt

If, after listening to numerous debt relief tips, you are considering bankruptcy as a debt relief option, remember that it will stay on your credit report for up to ten years and still may not solve all your financial problems. Certain debts cannot be erased by bankruptcy, including certain taxes, alimony and child support, student loans, and some property settlements. Recently passed laws regarding bankruptcy which go into effect in October 2005, prevents some people from filing for bankruptcy altogether and makes it harder for those who do qualify to come up with manageable repayment plans and provides fewer protections from collection efforts than the prior law. The only way to know for sure if you qualify for bankruptcy and if it is the right choice for you is to seek financial counseling from a qualified consumer credit counselor. To find a certified consumer credit counseling agency in your area, visit the National Consumer Credit Counseling Foundation's Web site.

Should I transfer my credit card balance?

Credit Card Balance Transfers

Transferring your high interest rate debt to lower rate credit cards may be one way to get some credit card debt relief, but it's not necessarily the best way. However, if you have considered all your other options, such as a home equity line of credit or loan, then by all means transfer away. Just keep in mind that you may end up paying a hefty balance transfer fee so make sure the fee isn't more than any interest savings you'll gain. If you take control of your debt situation, you won't need to seek out debt relief tips. The only way you are going to get ahead of your credit card debt is to pay more than the monthly minimum due. Even though your minimum payment will go down once you've transferred to the lower rate card, keep paying the same amount (or more!) you were paying in the first place. And, if you want to really get serious about paying off your credit card debt, consider setting up a push payment plan. It will save you interest and get you out of debt faster.

How do I get my creditors to leave me alone?

Dealing with Collection Agencies

The Fair Debt Collection Practices Act requires debt collectors to treat you fairly and prevents them from engaging in certain types of activities as they attempt to collect the money you owe. A debt collector can contact you in person, by mail, telephone, telegram, or fax between the hours of 8 a.m. and 9 p.m. You can stop a debt collector from contacting you by writing a letter telling them to stop. Once you've done that, the collector can only contact you to notify you that the collector or creditor intends to take some specific action. Just because the calls and letters stop coming doesn't mean the debt has miraculously been wiped clean. You still owe the money, and you should make an effort to pay the debt. If you recently set up a debt relief plan through a credit counseling agency and you are still receiving collection calls, it is possible that the collector has not been made aware of the agreement. Talk to your credit counselor about how best to handle the situation in that case.

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