Closer Look At Bankruptcy

Do you have a hard time paying your credit card bills? Starting to get
notices from waiting creditors to pay? Worried that you might lose your
properties like your house because of credit debt? Chin up: Dealing with
credit card debt is not as hard as you may think.

More and more consumers today find themselves in the uncomfortable situation
of only being able to afford the minimum payments on their credit cards. Or,
even worse, not being able to afford even the minimum payments. In today's
world, it is often easy to get in over your head and find yourself spending
more than you make. It seems that everything is going up but wages, and it
is all too easy to fall behind.
Learn more ways to reduce debts today.

There are numerous types of debt, including basic loans, syndicated loans,
bonds, and promissory notes. Debt, especially large sums of debt, can also
be secured through a mortgage or other security interest over some of the
debtor's property, in which case the creditor will have some rights over
that property in the event that the debtor becomes unable to repay the debt
and defaults on the loan.

Debt consolidation allows a consumer to present their financial case to a
lender who may be willing to take on the burden of paying off debts in
exchange for one monthly payment made to the lender.

A Closer Look at Bankruptcy

Bankruptcy is a process of the federal court that is aimed at helping both
businesses and individuals in clearing up their debts and repaying under the
protection given by the bankruptcy court. There are basically two types:
liquidation and reorganization. Liquidation bankruptcy, under Chapter 7 of
the bankruptcy code, occurs when you plead the court to have your debts
discharged. Some of your properties will then be liquidated or sold by the
bankruptcy court, returns of which shall be divided among your creditors.
This type of bankruptcy proceeding lasts for four to six months which is
quite fast and only one appearance at the courthouse is necessary. It is
very convenient and doesn't require payments stretched over time.

Chapter 7 bankruptcy isn't available to everyone, though. You may won't
benefit from it if in the past six to eight years, you have benefited from a
bankruptcy discharge. Likewise, if after examination of your income,
expenses, and overall debt, it was found out that the other type of
bankruptcy proceeding is more appropriate, then you can't insist on pursuing
this kind. Veterans who are now disabled and who incurred their debt at the
time of their active duty are almost automatically allowed to file. In
addition, those people whose debts are caused by running a business are
qualified as well. For those people not belonging to any of these
categories, certain criteria must be met.

The criteria has been affected by the new rules imposed on bankruptcy. One
of the considerations is your current monthly income which in turn will be
compared against the median income for a family of similar size in your
state. This isn't your income at the time of your filing. Instead, it is
your average income for the past six months before filing. Social Security
benefits like retirement and disability benefits aren't included in the
computation. If your income appears to be enough to support the other type
of bankruptcy proceeding in spite of permitted expenses and payments for
child support, tax debts, and others, liquidation bankruptcy is
unfortunately not allowed.

A home equity loan literally allows an individual to borrow from a lender
based on the amount of value they have earned on their home. If you use
credit cards, owe money on a personal loan, or are paying on a home
mortgage, you are a "debtor." If you fall behind in repaying your creditors,
or an error is made on your accounts, you may be contacted by a "debt
collector."

Having trouble paying your bills? Getting dunning notices from creditors?
Are your accounts being turned over to debt collectors? Are you worried
about losing your home or your car?

The Consumer Credit Counseling Service (CCCS) reports that calls from people
worried about debt have been increased by 50% compared with last year. After
you have contacted each creditor, you can start setting up a budget plan
that will help guide you through the process of eliminating your debts.
Start with a weekly budget plan and then work your way toward a monthly
plan. You should know that in either situation, the Fair Debt Collection
Practices Act requires that debt collectors treat you fairly and prohibits
certain methods of debt collection. Of course, the law does not erase any
legitimate debt you owe.

Many people, if given a choice, would prefer this type since repayment of a
portion of the debt is unnecessary. You may lose some of your properties but
some courts permit some sort of a leeway that doesn't take all to give you
something to start with afterwards. On the other hand, reorganization
bankruptcy, usually under Chapter 13, happens when you file to a bankruptcy
court a plan on how you intend to settle your debts. You indicate how much
each of your creditors will get, depending on your finances. There will be a
three- or five-year repayment plan, only after which can you be discharged
of your debts, if any still remains. At times, however, due to obvious
financial difficulties, the court itself decides to give a discharge earlier
than planned and this is what usually happens.

An additional requirement for both types of bankruptcy is completion of
credit counseling conducted by an agency recognized and approved by the
United States Trustee's office.
This helps you look closely at the situation at hand and identify if
bankruptcy is really essential. This allows you to see several possibilities
of informal repayment which you may have overlooked in the past. Even if
such is obviously impossible, counseling remains a major requirement.
Furthermore, completion of post-counseling is required after the
proceedings. This aims to teach you financial management to avoid
encountering the same situation in the future. The bankruptcy discharge will
not be released unless this is fulfilled. Bankruptcy may be beneficial for
both the debtor and creditor. This is a way of recognizing one's
responsibilities and mistakes that led to the financial difficulty. The
entire process takes into consideration both parties' interests and leads to
the development of an action plan that fulfills them.
As such, this law shouldn't be abused by any debtor thinking that a court is
there to intervene.

Bankruptcy, although generally advantageous, must be considered as a last
resort. You should, in all circumstances, work hard to be in full control of
your finances to avoid being estranged in difficulties. Discipline is indeed
a very crucial trait that must be maintained at all times. Having said that,
many borrowers can benefit from consolidating their debts on better interest
rate terms. Some credit cards cost up to 17.9 % (e.g.
MBNA) and store cards can cost more. Consolidating your debt could cut
interest payments by up to two thirds. If you've got a number of credit
cards and insurmountable credit card debt, then perhaps it's time to
consider a debt consolidation loan. A consolidation loan is a loan that you
can use to pay off all your debts, meaning that you can pay them off for
less money without having to worry about lots of different bills.

Secured loans make your creditors feel more secure about loaning you money.
When someone takes out a secured loan, that simply means there is collateral
to back up the money they borrowed.

Debt is a hard thing to live with, but we all have it and deal with it
everyday. Sometimes it is manageable, sometimes you feel like you can barely
keep your head above water and unfortunately many times you feel like you
are drowning in it!

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