Credit Cards and Bankruptcy

By Amina Isakovic

Here we are in an economic recession, people having to take more and more from their savings, and having to resort to credit cards to pay off their expenses. Interest rates have increased for some people up to high 27%! So what do you do? How do you dig yourself out of his debt, or is there nothing to save you?

First off, you can start by calling your credit card company and seeing if they will lower your interest rate. If not, check out this article on Ask Mr. Credit Card, for repayment plan options. You have to be in a dire situation, and always past due to have the credit card company help you.

Secondly, you have to sit down and figure out how much debt you have where. You have to know which debt to pay off first. Most likely it will be your cards that have the highest balance on it or with the highest interest rate.

And then finally, what if you just can’t pay them off at all, is bankruptcy your last resort? Do you belong to this category? If so, the laws have changed. Make sure you understand which chapter your situation belongs to. Sometimes it helps to hire a lawyer in this case, but this can cost you a lot as well.

Good luck, and in this economy, make sure to save more than you spend.

Articles:
http://www.askmrcreditcard.com/creditcardblog/how-do-you-start-a-repayment-plan-with-a-credit-card-company/
http://www.bankrate.com/brm/news/cc/19980713.asp
http://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Alternatives to Filing for Bankruptcy

By Michael Collins

When people get into financial trouble, choosing to file bankruptcy is often a way for them to escape their debt. However, there are other avenues that they can take to solve their problems.

Credit card debt is by far one of the most common forms of debt. People will often choose to simply make minimum payments, rather than pay in full every month. This leads to mounting debt, which is further increased by the high interest rates that are charged by the companies, up to over 30% in some cases. There are several ways to alleviate credit card debt without resorting to bankruptcy. Debt settlement is one common way. “In the strictest sense, debt settlement is an agreement between a debtor and a creditor to pay off any remaining debt at a reduced amount. Settlement occurs when a creditor is satisfied that a debtor no longer has the financial ability to repay the debt owed in full.”1 Debt settlement is often worked out by a separate company or group who set up payment plans. The debtor will begin putting money away into an account, from which the creditor(s) will withdraw in order to settle. Creditors will often settle debt if the debtor is considering bankruptcy, because if bankruptcy is filed, it is very likely that the creditor will not be paid at all. Bankruptcy will also severely hurt the credit rating of the debtor.

Mortgage debt is another common form. In order to avoid foreclosure or bankruptcy, debtors may choose to refinance, which is replacing a current mortgage with a new one. This is often done to take advantage of lower interest rates or in order to create a longer payment period with lower monthly payments. Another, more extreme way to avoid bankruptcy is for the debtor to liquidate some of their assets. Much like chapter 7 Bankruptcy, by selling off assets, the debtor can get the money they need to pay off their debt. However, unlike Chapter 7 Bankruptcy, this will not have an adverse effect on the credit rating of the debtor.

While bankruptcy is an option to get out from under debt, there are viable alternatives. These alternatives may be difficult for debtors in the short run, but end up being much better for them in the long run.

References

1- http://www.money-zine.com/Financial-Planning/Debt-Consolidation/Debt-Settlement/

http://www.legalhelpers.com/bankruptcy-alternatives/mortgage-refinance.html

http://www.franklindebtrelief.com/bankruptcy-alternatives.html