How to Reduce Your Credit Card Interest Rate

One of the most depressing things about having credit card debt is the fact that the high interest rate can mean that most of your monthly payment (if you carry a balance) goes to paying interest, rather than reducing your principal. This can mean a long, slow slog as you try to pay off debt.

However, you might not have to keep paying that interest rate. In some cases it’s possible for you to reduce your credit card interest rate… just by asking.

Steps to Reduce Your Credit Card Interest Rate

Is your credit card interest rate 18% or higher? Call the number on the back of your card, tell them you have seen lower rates and chances are that you can get them to lower it. It’s not always that simple, of course, but it’s a start.

Call and ask to speak to someone about your interest rate. In some cases, representatives are allowed to drop your interest rate by as much as 3% in order to retain you as a customer. If the first representative can’t help you, ask for someone who can help you lower your interest rate.

Your best leverage during the is if you have a recent offer in the mail with a low introductory rate of 0%-10%. Many credit card issuers are willing to drop your rate if there is the chance that you will take all of your money elsewhere. They’d rather have you pay some interest than ditch them and pay no interest at all.


If you don’t have a recent offer, check out the best current offers on low interest credit cards and balance transfer credit cards. Anytime you can offer a concrete possibility for switching to someone else, you have a bit of leverage during the phone call.

If you have been paying your minimum payment on time and they consider you a good customer, they will likely be willing to work with you to negotiate a lower rate. If, even after you have mentioned that you will switch your business, and they still refuse to lower your rate, remain polite and make ready to transfer your balance.

Tips for Speaking with Representatives on the Phone

If you want to reduce your credit card interest rate, you will need to make sure that you have it together on the phone. Here are some tips for speaking with credit card companies:

• Be polite: Don’t get rude. Remain polite and calm throughout.
• Ask for what you want: Be straightforward about how you want a rate reduction. Be clear that is what you want, and ask the representative to connect you with someone who has the authority to make it happen.
• Be prepared: You can create a script, or jot down some talking points. Also, be prepared to carry through on your threat to transfer your balance elsewhere.

If you phone your credit card company and get your rate lowered, please leave a comment and let us know what your rate was and what it’s at now!

source: canadianfinanceblog.com

4 Tips to Help 40-Somethings Manage Their Debt

Handling debt is a challenge for those of all ages, and the problems start early in our adult lives. It's only natural to incur some heavy debts in our 20s and 30s, as we're dealing with the imbalance between our relatively scarce financial resources and the sizable expenses of getting started with careers and families.

By the time you hit your 40s, you might hope to have moved past that phase. But although many people in their 40s have well-established careers that produce sizable incomes, they also often face growing financial commitments -- both to themselves and to family members. That's a big reason why 40-somethings have the highest levels of debt of any age group, and unlike younger groups, they've seen their debt levels increase slightly since 2005, according to figures from the FICO Banking Analytics Blog.

Debt management in your 40s isn't just about paying down debt. It's also about making sure you're using the right kind of debt to handle the most important expenses you face. Also vital -- maintaining the ability to repay your debts while simultaneously ramping up savings for your longer-term goals.

To address all those issues, here are four things that 40-somethings should keep in mind in dealing with their debt.

1. Anticipate Big-Ticket Expenses.

Dealing with unanticipated expenses can break the budgets of young adults. But by the time you hit 40, you have plenty of life experience behind you and can predict what sorts of financial demands will come up. In particular, major expenses like putting children through college or replacing a vehicle are fairly easy to foresee. The smarter you can be about planning for them beforehand, the better you'll be positioned to minimize how much debt you have to take on to pay for those expenses later.

Having an emergency fund with three to six months' worth of income is out of reach for many young adults, but by your 40s, it becomes more realistic. Having that fund available can keep you from incurring debt and provide a cushion you can tap later for college expenses and other big-ticket items.

2. Get The Right Protection For Your Family.

As 40-somethings hit the peak debt levels of their lifetimes, they're most vulnerable to unforeseen tragedies like a death or major illness in the family. Between lost income and increased expenses, such events can crush even a well-crafted financial plan.

Having the right insurance policies in place to protect against tragic events can ensure your family's financial survival. A simple term-life insurance policy usually costs relatively little but can provide enough death benefits to pay off a home mortgage and other debt while potentially leaving additional savings available for future needs.

Disability insurance can replace lost income and cover qualifying expenses if you're unable to work following an accident or illness. Working with an insurance company to craft the right protection package for you could mean the difference between beating debt and suffering a big financial setback.

3. Put Your Best Debt-Foot Forward.

Young adults tend to take advantage of credit wherever they can get it. But as you get older, your access to better credit should increase, allowing you to skip expensive forms of debt like credit cards and payday loans and instead get low-rate loans that are much easier to pay off. Although low-rate specials on car loans and credit cards can make their interest costs attractive, the most consistently inexpensive financing usually comes from a home mortgage or home equity loan, with government-subsidized student loans also offering reasonable rates for many students. If you have to have debt, look to consolidate it into these favorable areas, then avoid taking out further high-cost debt in the future.

4. Set the Stage For Your Own Future.

As important as debt reduction is, 40-somethings also have to face the inevitability of their own future financial needs. One big reason why it's so important to get rid of bad debt and focus on concentrating outstanding balances in inexpensive forms of credit is to give yourself the flexibility to save more for retirement. As your salary increases, the potential matching contributions from your employer also rise, and you won't want to miss out on the opportunity to collect more free money to put toward your retirement savings.

The hallmark of your 40s is that debt stops being a necessary evil and starts becoming more of a potentially useful tool. By focusing on the positive aspects of debt in helping you balance competing financial needs while avoiding the downsides with which you're already familiar, you can put debt on your side and manage it effectively.

source: dailyfinance.com

Settle Debts Before Investing?

Question: Hi Rose. I enjoy reading your FQ and parenting articles. I also want to start investing now but I think I have to settle my debts first. What do you think? – J.N. via email

Answer: Hi J.N. Yes I agree with you. If you have been carrying debts, which cost you money, the first step is to pay them off. Think of it this way, if you’re able to pay off your credit card debts that charge 3.5% per month, you just “earned” yourself an annual return of 42%! Where can you find an investment return like that?

Sometimes people are also afraid to touch their Emergency Fund to pay off their credit card debts because they want the security of having ready cash for emergency. However, please remember that while your credit card charges you 42% p.a. your Emergency Fund, even if kept in money market placements, only gives you around 2-3% p.a. So pay those loans, then start building your Emergency Fund again. If you have an existing home mortgage with a decent interest rate of 5 to 5.5% p.a., then I think you don’t have to wait to fully pay that before you can start investing. Just make sure that you pay your mortgage on time so you don’t incur penalties and other charges.

I am preparing for a half-day workshop this week for the employees of a government agency. The Human Resources Director asked me to tackle the issue on debt management because she knows that a lot of their employees have debt problems.

She shared with me that their salaries are still given in cash instead of direct credit to employee ATM accounts. When I suggested that they shift to direct credit system in order to nudge their employees to save, she said, “We’re concerned that they might pawn their ATM cards!” I was surprised to hear this and learn that this has become a common practice among people who are living from paycheck to paycheck.

The Origin of Debt:



To know more about debt, I did some research on the origin of debt. I found this book entitled Debt: The First 5,000 Years by anthropologist David Graeber. His interesting theory is that debt originated as early as 3500 B.C., long before the advent of coinage or money in 600 B.C., refuting the traditional explanation for the origins of monetary economies from primitive bartering system as laid out by Adam Smith, the father of modern economics.

I’m not yet done reading the book but it promises to be an interesting read as it talks about how throughout our history indebtedness has led to unrest, insurrections and revolts. The morality of debt is also discussed – how people mired in debt would resort to using their children as payment; how the IMF and the big banks convinced the Third World dictators and politicians to take out loans (while pocketing some in their Swiss accounts) whose interest rates later on skyrocketed leading to the Third World Debt Crisis in the 80s; how the sub-prime lending era crafted mortgages that makes default inevitable, taking bets on these defaults and selling them to institutional investors, turning over the responsibility of paying off debts to giant insurance conglomerates and eventually being bailed out by taxpayers.

What we can gather from this data so far is that debt is really something to be careful with, both on a personal and national/international basis. Inasmuch as it can help us enjoy big-ticket items like buying a house or expanding our business, growing our country without having to put up 100% of cash required, mismanagement can also make life miserable. I’m glad that you intend to pay off your debts now.

Ways to pay off your debts:


The most cost-efficient way to retire your debts is to pay off those which carry high financing cost. And since front-end fees would have been paid by now, these are the loans that carry the highest interest rates. Always make sure you compare the rates on a per annum (p.a.) basis.

However, since handling money is not all about math but has a lot to do about emotions, there are a lot of proponents of the so-called Debt Snowball Method. This method, popularized by Dave Ramsey, advises you to pay off the loan with the smallest outstanding balance first, on to the bigger ones until you pay off all loans. The primary advantage of this method is the psychological contentment that you will feel as you tick off debts from your list. So the smaller the debt, the easier and sooner you can pay it off. You’ll feel the progress more in doing this and give you optimism and drive to pursue until all debts are paid off.

Check which one works for you. As I’ve discussed in previous articles, humans are not always rational and we should work out systems for ourselves such that we move towards our goals more successfully.

May I also remind you not to incur new debts? Review and reflect on how you got into indebtedness so you know what to avoid. Remember debt is bondage. The sooner you get out of it, the closer you move towards your financial freedom. Continue to read up on investing. The more you know about it, the more excited you will be to start the adventure, the more motivated you’ll be to pay off your debts.


Quotes on Debt:

Let me end with some quotes on debts that may be good for you to ponder upon.

“Wars in old times were made to get slaves. The modern implement of imposing slavery is debt.” - Ezra Pound

“If you have debt I’m willing to bet that general clutter is a problem for you too.” - Suze Orman

“In the long run we shall have to pay our debts at a time that may be very inconvenient for our survival.” - Norbert Wiener

“One of the greatest disservices you can do a man is to lend him money that he can’t pay back.” - Jesse Jones

“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” - Henry Wheeler Shaw

“Debt is the secret foe of thrift, as vice and idleness are its open enemies.”-James H. Aughey

“It is poor judgment to countersign another’s note, to become responsible for his debts.” - Bible

“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.” - John Maynard Keynes

I wish you freedom from debt soon and financial happiness.

Sincerely,

Rose

source: philstar.com

How to Refinance Any Debt

What do you think of when you hear the word refinance? If you’re like most people, you probably think of refinancing a mortgage.

In my weekly newsletter, however, we’ve been talking about how you can refinance any debt. I’ve encouraged my newsletter subscribers to write down every debt they have, including the interest rate. With the list in hand, they are reviewing each loan to determine if they can lower their interest rate. It’s one of the easiest ways to save money.

So today I thought we’d look at what refinancing involves, why you might want to refinance, and how to refinance any type of debt.

What is Refinancing?

Refinancing is trading one debt for another. If you refinance your mortgage, you’re trading your original mortgage for a new mortgage, usually with better terms that save you money.

You could also trade your credit card debt for a lower-interest home equity loan, which is refinancing. Or you could move your car loan to a new lender to get a better interest rate.

Sometimes you refinance with the same lender. In this case, you’re changing the terms of your original loan based on new financial factors, such as a better credit score on your part or lower overall mortgage interest rates. Sometimes, you may take out a new loan to pay off the old loan, getting better loan terms in the process.

As an aside, a loan consolidation is a bit different. With consolidation, you are usually consolidating multiple loans into a single loan. This process is a form of refinancing, but involves trading multiple debts for one.

When Should You Consider Refinancing?

Usually the goal of refinancing is to save money, especially on interest paid over time and on monthly payments. But you could also choose to refinance to change your loan terms.

For instance, you might refinance your mortgage from a 15- to a 30-year loan. A longer term gives you lower (often much lower) monthly payments, which are great if you’re in a financial pinch. Even if you’re paying your 15-year mortgage with ease, you might want to take a longer term and invest the extra money each month, hoping to come out ahead financially in the long run.

On the flip side, you might choose to refinance your 30-year mortgage to a 15-year mortgage. If you want to be debt free faster, this is a way to make it happen without making extra mortgage payments. Plus, the shorter loan term can save you tens of thousands of dollars in interest paid over time because 15-year interest rates are lower and you’ll pay down principal faster.

If you owe less on your home than it’s worth, you might want to do a cash out refinance, in which you remortgage it and take the difference in cash.

One more option is to switch from a variable-rate mortgage to a fixed-rate mortgage. A set interest rate and predictable payments can make it much easier to plan your personal finances.

As you can see, there are many instances in which you might consider refinancing your debts. Be sure you run the proper calculations, especially if you’re refinancing a larger debt like a home or a car. These refinances can cost you cash up front, so make sure they’ll be worth your while in the long run.

Refinancing other debts, on the other hand, may not be so complicated. If you’re dealing with high-interest credit card debt, all you need to do is transfer the balance to a lower-interest card to save a fortune.

How to Refinance all Your Debts

As I said earlier, you can refinance any debt with the proper steps. Here are some of the ways that you can refinance various types of debt:

Straight-up refinancing

 

Although any of these methods is refinancing, let’s first talk about traditional refinancing. This term is most likely to be used for mortgage loans, auto loans and student loans. Basically, you either get a loan with better terms from your current lender or from a new lender. The key to this is to shop around for your new loan.

Refinancing your mortgage may take more legwork because you’ll likely need to talk with loan officers about refinancing offers and the potential costs of the process. When refinancing a secured loan like your home or auto loan, you may not be able to refinance if you owe more than the home or vehicle is worth. A loan for more than an item is worth is riskier for lenders.

We talk elsewhere about how to refinance a home in which you don’t have a lot of equity. One option is to refinance through the Home Affordable Refinance Program, and another is to take out two loans, one for the negative equity in your home, and another for a regular mortgage at a lower rate.

If you have negative equity in your vehicle, you may need to take out a separate, unsecured loan to pay down part of the car loan. For instance, if you owe $15,000 on a car worth $11,000, take out an unsecured loan (or use a low-interest credit card) to pay off $4,000, and then refinance the remaining auto loan. Or you could keep paying on the vehicle until you build more equity.

Finally, let’s talk about straight-up refinancing of student loans. Because student loans are unsecured, it’s very hard to get a new lender to take them on at a lower interest rate or better terms. Bloomberg’s BusinessWeek notes that there are several ways to change some of your student loan terms. If you can’t make minimum payments on federal loans, look into modified payment plans or forbearance. Even some private lenders offer forbearance in some instances.

Unfortunately, you probably won’t be able to refinance these loans at a lower interest rate simply by finding a new lender. But you may be able to use one of these options for refinancing your student loans:

Using your home’s equity

 

If you have equity in your home, you can use that to refinance some of your other debts, such as school loans, credit cards or other personal debts. There are three options for doing this, including a home equity loan, a home equity line of credit, and a cash out refinance:

• Home Equity Loan: This is an installment loan based on your home’s equity. It’s also known as a second mortgage. If your home, for instance, is worth $500,000 and you owe $300,000 on your first mortgage, you could borrow $150,000 against your home’s value as a second mortgage. You’d pay back this type of loan in set installments, just like your first mortgage. All other things being equal, however, the interest rate on a second will be higher than your first mortgage
• Home Equity Line of Credit: This is similar to a home equity loan, except that it’s a revolving debt like a credit card. With a HELOC, you can write a check or use a debit card attached to the account, pay back some or all of the charge, and then charge again.
• Cash Out Refinance: Instead of taking out a second mortgage as a home equity loan, you might consider a cash out refinance, which will leave you with one mortgage payment. In the home equity loan scenario above, you could just refinance your first mortgage as a $450,000 mortgage, and take the excess $150,000 in cash.

Using your home’s equity to refinance other debts can be a good option because a secured loan against your home’s equity will likely have a much lower interest rate than the rates on other debts.

The rates you’ll pay on a home equity loan are typically much lower rate than you’re likely to be paying on any credit cards, and it’s also a lot lower than the locked-in 6.8 percent rate on federal student loans. So you could lower your overall debt payments and reduce the time it takes to pay off debts by using your home’s equity to pay off the balance of other loans.

If you can’t pay on your credit cards or student loans normally, the creditors can’t come after your property directly. If you can’t pay your HELOC or home equity loan, your lender could foreclose on your home.

Refinancing with credit cards

 

The most common way to refinance credit card debt is a balance transfer. You transfer the balance from one credit card to another, normally with a much lower interest rate.

Your best bet is to consider a zero interest credit card set up to encourage balance transfers. Note that some balance transfer credit cards come with fees, even if they have a limited-time zero interest rate on balance transfers.

There are some no-fee balance transfer cards available, so you should check out these options first. Some cards have an option for either zero interest with a balance-transfer fee (which is usually a percentage of the balance you transfer), or a zero transfer fee with a low interest rate. You’ll have to do the math to figure out which works best for you.

If you get a really great deal on a credit card and have enough available credit, you can use a credit card to refinance other higher-interest debts, as well. For instance, you could pay off a very high-interest personal loan with a lower-interest credit card, effectively using your credit card to refinance it.

Always check your credit card contract first because different types of purchases, transfers and payments may result in different interest rates.

Debt consolidation

 

If you’re swamped in debt and are unable to make minimum payments on everything, debt consolidation could be a good option. You’ll get one large loan to pay off part or all of your other debts, consolidating them into one loan.

The advantage of debt consolidation is often that it lowers your overall monthly payments, a relief for hard-hit consumers. Depending on the interest rates of the loans you’re carrying, consolidation may lower your overall interest rate and total interest payments.

According to the FTC, using your home’s equity is the most common way to consolidate debt, but you may also be able to get a consolidation loan. However, some disreputable so-called debt relief organizations will offer debt consolidation loans that aren’t a great deal. They may increase the overall interest paid, extend your repayment time to decades, or charge fees that increase your overall debt load.

It’s very common to consolidate student loan debt, and this is usually an automatic option with federal student loans. If you took out student loans for several years in a row, you probably have several loans from several lenders. It’s a pain to make so many separate payments, and your minimum payments are probably quite high.

In this case, you can consolidate all your loans into one by a single lender. Consolidating federal loans usually means that you lock in your interest rate, which may otherwise vary from year to year. Plus, you could lower your overall monthly payments and gain access to several repayment plans.

You’ll have to consolidate private student loans separately, but there are several lenders who will do it. You can read more about how to consolidate student loans here.

Using LendingClub or Prosper

 

LendingClub and Prosper are peer-to-peer lending marketplaces. Basically, you can get a fairly low rate on an unsecured personal loan that comes from other individual lenders. LendingClub statistics say that nearly half their loans are used to consolidate debt or pay down credit cards with a lower interest loan.

Peer-to-peer lending options generally come with competitive interest rates that depend on your credit history, and they’re relatively quick to get. But the loan limits are usually around $25,000, though you may be able to take out multiple loans at once. They can be a good option if you need to refinance debt quickly.

The Bottom Line

 

Refinancing some or all of your debts may or may not be a good idea. Look at your debts, interest rates and minimum payments. If you could reduce interest rates significantly, refinancing is usually a great option. Also, if you can lower your monthly payments, you could kick the money you save into paying off your principal balances more quickly, or into investment accounts that allow you to save for the future.

source: doughroller.net

Bank of America's Newest Credit Card Pays You to Repay Them

A new credit card from Bank of America (BAC) will offer cash rewards up to $120 a year to cardholders who pay off more than the minimum balance every month.

The BankAmericard Better Balance Rewards card gives cardholders $25 per quarter as long as they always pay their bill on time and pay off more than their monthly minimum due amount. Cardholders who also have a Bank of America bank account get another $5 each quarter, bringing the total to $120 a year just for staying on top of their bills and making an effort to bringing down their debt. The rewards can be cashed out or put toward your credit card balance.




That's a very different rewards program than you see on standard rewards cards, which focus on getting cardholders to spend as much as possible to get cash back. And while those rewards cards tends to be geared toward people with excellent credit, the Los Angeles Times notes that this card is likely to be aimed at lower-income consumers with fair credit.

So is the card a good deal?

The rewards are certainly attractive. To get $120 in annual cash rewards on a standard rewards card with 1 percent cash-back, you'd need to spend $12,000 in a calendar year (though bonus categories with rewards of up to 5 percent can allow you to get there more quickly).

By contrast, you don't have to rack up a ton of spending on this card to get a comparable cash bonus. In fact, even if you have only a $15 minimum payment, you could put a measly $20 on the card every month, and as long as you're paying a little more than the minimum due amount, you'll reap the rewards. If you also have a bank account with Bank of America, that means you could wind up getting $120 in bonuses on $240 of spending, a tidy 50% cash-back rate.

But that same feature also means that the card doesn't necessarily encourage people to make a serious dent in their balances. Because the cardholder need only pay "any amount more than the monthly minimum due" to get the cash bonus, simply paying a dollar over the minimum would be sufficient to get the rewards. A better incentive to encourage responsible borrowing might be to require cardholders to pay a minimum percentage of their total balance.

Another issue is that the annual $20 perk for holding an account with Bank of America might backfire on some consumers. The card, after all, is aimed at lower-income customers, who may not be able to maintain the necessary minimum account balance to avoid Bank of America's monthly account fees. If you're considering this card and you're currently with a bank or credit union that doesn't charge a monthly maintenance fee, you should examine Bank of America's fee structure to make sure that switching banks won't cost you considerably more in the long run.

As with any other credit card, then, you'll need to examine your own personal finance habits to determine whether it's a good fit for you. Played the right way, the Better Balance Rewards card can help you make some easy money without significantly altering your spending. Just don't be fooled into thinking it's a magic bullet for eliminating your credit card debt.


source: dailyfinance.com

Debt Consolidation To Free Yourself From Slavery

You’ve probably heard someone say that the borrower is slave to the lender. If you’re currently struggling with debt, have you ever thought about how true this is? Owing money to someone is constantly in the back of your mind. Every dollar that comes in comes with a nagging reminder that it’s not really yours – that you owe it to someone else.

Every purchase you make might also set off an alarm bell, telling you that it really belongs to the person or institution who you’re in debt to.

The word slave might be a bit melodramatic, but it’s not that far from the truth. It’s a terrible feeling to be in that kind of debt to someone, so let’s talk about how to get out.

If you’re truly drowning in debt, be it credit cards, student loans, lines of credit, car loans, or some combination of all of these, being pulled in so many different directions is just as stressful as the actual amount you owe.

That’s why debt consolidation can be a good option to help deal with everything.

Debt consolidation is the process of borrowing enough money to pay back all of your debts at once. This loan is then your only debt that you’ll focus on paying down. At first it may seem like you’re just moving money around, but there are several benefits:

• Lower monthly payment – rather than a bunch of different monthly minimum payments (which you may not even be able to afford), you’ll be able to negotiate for a single payment that works well with your income and budget. This alone can take a lot of the stress off of your debt. Of course a lower monthly payment means it will also take longer to pay off your debts. There are many calculators available to help you see what your options are. Check out http://debt.ca for some great ones.
• Lower interest rate – some debt, such as credit card debt can carry an astonishingly high interest rate. Through debt consolidation you may be able to negotiate for an interest rate that is, on average, lower than what you were paying before.
• Less pressure – if you’ve been getting harassed by creditors, debt consolidation will stop all of that. Debt consolidation Ontario or any other province in Canada will speak directly to your creditors and arrange payback in full. You’ll only owe one institution, and they’ll be the ones setting up your payments to make sure you don’t fall behind again.   

There are some dangers to debt consolidation. If it was bad habits that got you to this point, doing what seems like clearing out your debts might lead you to make the same mistakes again. For example, if your credit card is maxed out and all of a sudden it’s cleared, you might be tempted to make more purchases with it. If you think this might happen, debt consolidation will only serve to drive you further into debt.

source: christianfinanceblog.com

PLDT borrows $300 million to refinance debt

MANILA - Philippine Long Distance Telephone Co has borrowed $300 million from foreign banks to refinance existing debts.

On the sidelines of the Philippine Investments Forum 2013, Annabelle Chua, PLDT treasurer on Wednesday, said the fresh loan was signed last January.

Last November, PLDT borrowed P6.20 billion. It also raised P8.80 billion worth of fixed-rate corporate notes to a group of primary institutional lenders to refinance its existing debts.

At end-September, PLDT's total debt stood at $3.1 billion, including the $500 million owed by Digital Telecommunications Philippines Inc (Digitel), which PLDT acquired in 2011. Digitel operates Sun Cellular.

In the first nine months of 2012, PLDT's net income fell by 6 percent to P28.7 billion from the previous year's P30.6 billion.  For the third quarter alone, its profit slipped to P9.21 billion from P9.32 billion a year ago.

Consolidated service revenues rose 12 percent to P126.24 billion from P112.27 billion in 2011. In the third quarter, service revenues climbed to P41.52 billion from the previous year's P36.65 billion.

InterAksyon.com is the online news portal of TV5, a member of the PLDT group.

source: interaksyon.com

Can You File for Mortgage Bankruptcy?

Have you fallen behind in your mortgage payment?  Do you worry about losing your house or creditors calling you?  If so, you are not alone.  Since 2008, many people have had to leave their homes because they could not keep up with the monthly payments and were eventually foreclosed on.  Thousands of homes sit empty because people bought homes with alternative mortgages such as 0% down or adjustable rate mortgages.

If you now find yourself unable to keep up with your mortgage payments, you have a few options.


 Can You File for Bankruptcy on Your Mortgage Alone?

If you are behind on your mortgage payment but not on the rest of your obligations, unfortunately, you cannot file for mortgage bankruptcy alone.  Likewise, if you are behind on your second mortgage but not your first, you can’t file for bankruptcy on just the second mortgage.



When you file for bankruptcy, you must include all of your debts.  Creditors can no longer contact you about repayment.  If you file for Chapter 7 bankruptcy, you will lose your home as it will be liquidated to help cover your debts.  If you can afford to make payments on your debts, a far better choice is to file for Chapter 13 bankruptcy as your home and retirement, among other assets, will be yours to keep.

What Other Alternatives Are There to Filing Bankruptcy?

If you only want to file bankrupcty due to your mortgage, you have a few other options available instead of filing bankruptcy.

1.  Apply for a mortgage modification.  Many, many Americans have been able to keep and stay in their homes over the last several years thanks to loan modifications.  You can apply for a loan modification whether you are current in payments, behind, in foreclosure or filing for bankruptcy.  The bank often prefers to work with you on a mortgage modification so that they can get their money.  Foreclosing on your property also costs the bank money and time that they would rather not spend.

2.  See if you have enough equity in your first mortgage to become current on your second.  If you are current on your first mortgage but behind on your second mortgage, you can see if you have enough equity in the home to refinance.  You can then take the money from the first mortgage to help you become current with your second mortgage.

3.  Stop making payments temporarily.  If you simply need some breathing room financially, you can stop making payments temporarily.  The bank will eventually begin the foreclosure process, but in some states, when you make another payment, the foreclosure process has to start all over again from the beginning.  Of course, this is not the ideal way to go.  Some people believe this is unethical, and you do run the risk of losing your home.

If you are behind on your mortgage and considering filing bankruptcy, remember that there are other alternatives before you take such a drastic step as filing for Chapter 13 or 7 bankruptcy.  Often the best choice is to contact the bank, explain your situation and see if they will be willing to work with you.

source: everythingfinanceblog.com

How to Restructure Credit Card Debt

For consumers struggling to make ends meet and racking up credit card debt and barely making minimum payments, hardship programs might provide a welcome relief.

Many credit card companies offer these programs that target borrowers who have fallen behind on payments. They typically offer debtors lower interest rates as well as reduced payments, fees and penalties. In general, most hardship programs fall into two categories: short-term, which could be for a few months or up to a year, or permanent which is until the credit card balance is paid.

Credit card companies don’t publicize these programs because they hurt revenues due to the lowered interest rates. But for most banks, these programs are a better option than not getting any money back as a result of an individual’s default or bankruptcy.

Delinquency: Not a Good Strategy

There are a couple of things to keep in mind when approaching a credit card company about enrolling in a hardship program. Most creditors will want to look at your income and expenses so be prepared to explain your budget. The company will evaluate your ability to pay your debt to determine your eligibility.

They will also look at your account history, so it is a good idea to inquire about the program before falling behind on payments. Using delinquency as a strategy to get your creditor to work out a deal with you is a bad idea. You’ll get a more sympathetic ear if you approach them prior to missing a payment.

Hardship programs are not designed for reckless spenders who have maxed out their credit cards and are looking for an easy way out. They are aimed at debtors who have been hit by catastrophic, life-altering crises like a job loss, major illness, inability to work or loss of spouse or breadwinner. That is not to say that banks will not work with you if you don’t fit into one of these categories.

Stop the Plastic Habit

Be warned that these programs usually mean you will lose use of the credit card. In most cases, your charging privileges will be suspended or revoked. Some companies, however, have programs that restore your privileges upon completion of the program.

Entering a hardship program could also impact your credit score. Before entering the program it is a good idea to ask what repercussions this could have on your credit. Some companies negatively report this information to credit bureaus. Sometimes the negative references on your credit are removed after the program is completed. When negotiating with your creditor about being placed on the hardship track, it is important to understand the card issuer’s policies and the consequences.

The policy on credit reporting depends on the company. Most short-term plans are no more than a year. Long-term plans can go as long as five years. American Express, for example, doesn’t negatively report borrowers on short-term programs. But those who are on long-term programs should expect large dings on their credit regardless of what bank or issuer you owe.

source: foxbusiness.com

File Bankruptcy to Get Off Mortgage With Ex?

Dear Bankruptcy Adviser,

My ex-husband and I divorced in 2005 and he kept the house. The problem is that we agreed to everything but didn't specify that he must get my name off the house in the divorce papers. So we both have remarried and he has been late on the house payments, which is affecting my credit and preventing me and my husband from getting a home loan. My ex-husband is missing payments. He does get caught up, but this has occurred on and off. It also means he cannot refinance because his credit is poor and now mine is, too. So my question is: Could I file bankruptcy and list only the house so that I am no longer responsible for it? Also, if I did file, would that affect me being able to get a loan for a house?

-- Kathy

Dear Kathy, Most things in life are not as simple as we want them to be. I respect that you just want to be done with the ex-husband and the past. Your approach may work, but not as easily as you would like it to.

If you are eligible for the Chapter 7 bankruptcy, it would eliminate your liability on the mortgage but it would not remove your name from the property title or the mortgage loan. You may have signed your name off of the title during the divorce, but your ex-husband would have to refinance the mortgage to take your name off the loan.

Here are the issues you have to address.

Are you eligible for Chapter 7 bankruptcy? You did remarry. While you can file bankruptcy as an individual, you must qualify as a couple. Your new husband may have separate assets and those generally do not need to be listed in your bankruptcy. However, his income and any post-marriage assets must be listed in your case. So, you need to find out whether you are eligible for Chapter 7 bankruptcy.

Do you have joint accounts with your new husband? The bankruptcy will impact any joint credit card accounts that you have with your husband. He can keep paying and his credit should not be harmed, but the lender may place a notation on his credit report. That note will say, "Included in bankruptcy." I am not a credit reporting expert, but I have researched this issue and my research shows that this note should not impact his credit score. It may only require an explanation to future prospective lenders.

Know that all debt must be included. You cannot file bankruptcy only on some debt. You have to include all other accounts, such as credit cards or personal loans. Even accounts without balances will likely be closed. You can start over, but not with your current accounts.

What will happen to your mortgage with your ex-husband? The mortgage lender will receive notification that you have filed bankruptcy. The positive part is that future late payments will no longer report to the credit bureaus.

The negative part is that a future foreclosure will show up on your credit report. Your ex-husband may lose the house in foreclosure one, two or many years later. The lender would not have been reporting the late payments on your credit report all that time, but will report the foreclosure. That will definitely impact your credit.

Will you be able to get future mortgage loans? The bankruptcy will impact your credit for the next few years. Even though the bankruptcy notation stays on your credit for 10 years, you can get new credit sooner. Obtaining credit after bankruptcy is not impossible and your new husband could help you establish new, post-bankruptcy credit. Even though I do not endorse co-signing, it is a way for your current husband to help rebuild your credit faster.

You cannot expect to get a mortgage loan immediately after filing. Lenders want to see that you have established post-bankruptcy credit and confirm the bankruptcy case was filed more than two years ago.

As I said, this is an option, but most things are not as easy as we would like them to be. You will have to do some research and may need to talk to a bankruptcy attorney before you take this approach.

source: foxbusiness.com

How to Get Rich Leveraging Debt

How many stories have we all heard about the entrepreneur that came to America with five cents and turned it into an empire? It’s stories like this that make us long for a piece of that American dream. We all wish that we could turn our nickels into big money, but most of us don’t know how to do it. The secret is using debt wisely to leverage more income producing streams. No one can turn five cents into five million dollars overnight, but by taking chances and finding ways to use debt smartly, you can become financially independent, just like the entrepreneurs of old.

The thread that binds all of these success stories together is that somewhere along the way, these entrepreneurs had to go into debt to make more money. Unless you’re Rumplestiltskin and know a way to spin straw into gold, you’re going to have to start taking chances. While it’s perfectly acceptable to put money aside every month or even put it into an interest bearing account, you’re going to nickel and dime yourself for years. You might be able to put aside a nice little nest egg, but what if you want to become really wealthy?

In order to accomplish that, you’re going to have to extend what you already have. It’s pretty frustrating to look at your checkbook and see the cold hard truth that your dreams of wealth are not panning out. It’s even tougher to spot a great opportunity, like a hot stock, and not have enough money to take advantage of it. However, there are ways that you can take advantage of that opportunity, even if you don’t have a lot of money in the bank.

Let’s say that you have the chance to purchase some shares right now. You don’t have the money on hand, but instead of giving up, you go to the bank and you get a loan for the money you need. You buy those shares and in five years, they’ve returned 500% of your initial investment. If you hadn’t taken that risk of going into a small amount of debt, you never would have been able to reap those rewards. Instead, you’d be muttering into your coffee as the news comes in on how well that stock you could have had is doing.

While most of us think of the word debt and blanch, when used properly and managed well, it is the key to becoming wealthy. Do you think billionaires spend their own money when they want to buy a new building? No, that would be silly. They put together a plan and get financing to pay for it. Then, when the rents for the building come in, they pay off that loan and go find another property. That is leveraging debt at its finest. You’ve got to have money to make money and unless you’ve already got it, you’re going to need to go into debt, at least at first, to make those big dreams a reality.

source: richcreditdebtloan.com

How to Determine How Much to Give

 Dear Dave,

We’re debt-free except for our house, and that’s on a 15-year, fixed-rate mortgage. We also have an emergency fund in place. We’d like to give back this year, and do some Secret Santa things and a little extra giving. At what point should we start giving over and above what we tithe?

-Jeremy




Dear Jeremy,

My advice would be to wait until you finish Baby Step 3, which it sounds like you’ve done. That way, you’ve paid off all of your debt, except the house, plus you have a fully-funded emergency fund of three to six months of expenses.

You mentioned tithing, so I’ll cite the Scripture that says he who doesn’t take care of his family is worse than an unbeliever. I’m paraphrasing, of course, but in my mind, from a financial point of view, taking care of your family means having your emergency fund in place and being out of debt, except for your house. At that stage, you’re beginning to build wealth and you can really help others while knowing those closest to you aren’t going without.

My wife and I made the decision a long time ago to live on a certain amount of money. We apply a formula to everything above that figure for tithing and taxes. The rest we allocate for giving, saving and spending. It works great for us, but be responsible and realistic with what you have. You don’t want one of those areas to hinder the others.

-Dave

Dear Dave,

Do you have any advice for deciding which charities to give money to during the holidays?

-Danny

Dear Danny,

There are so many great organizations out there. It’s virtually impossible to pick three or four and say with any certainty they’re the best.

When it comes to choosing, I think the amount of diligence you put into the decision-making process should correspond directly to the amount of money you’re giving. There’s no reason to spend hours in exhaustive study over a $20 donation. However, you’d want to put some time and thought into research if the amount is $2,000.

In situations like this, I’d want to see full disclosure. I’d like to know the expense ratios of the organization and how much money goes toward administrative costs. Every organization has bills to pay and salaries to consider, but you don’t want overhead to eat up 90 percent of every dollar donated.

Helping a good cause is wonderful, but you’ve got to be reasonable and wise about these things. Don’t feel bad about asking to visit a site and take a tour. Lots of times you can get a feel for what’s going on by just walking around and gauging the people you encounter. Regardless, the bigger the gift, the more time you should spend investigating!

—Dave

source: foxbusiness.com

4 Ways Credit Cards Manipulate You Into More Debt

Credit cards are engineered to make sure you become a long-term, loyal, and indebted customer. Since many of the decisions that consumers make are not rational, card issuers work on those irrational impulses to make sure you spend money with their card without thinking logically about your actions.

Here are four methods that card issuers use to get you to sign up for their cards and keep you in debt. (See also: Which Type of Rewards Credit Card is Right for You?)

1. Appealing to Your Individuality and Creativity

Once upon a time, credit cards all came in the same boring colors. But sometime in the past 20 or so years, banks started allowing cardholders to express their individuality through their credit cards. Suddenly, you could show off anything from your adorable nephews to your commitment to the Humane Society with every purchase you made.

Part of what is going on here is something behavioral economists refer to as the IKEA effect. This effect causes individuals to value something more if they worked to create it. Not only does that mean you’re more likely to keep the inexpensive IKEA bookcase you put together with your own hands for years after you don’t need it anymore, it also means that you are going to overvalue the credit card whose cover image you chose.

In addition, your pleasure at seeing the chosen image will make you want to show it off — that is, use it more often.

2. Encouraging Instant Gratification

The very essence of credit — putting off payment — is something that appeals to a nearly universal cognitive bias called the present bias. (A cognitive bias is an error in logical thinking that is very difficult for an individual to recognize in himself.) Basically, this cognitive bias makes an individual value an immediate experience over future experiences.

The present bias is why it’s so easy to stay up late to watch the "Doctor Who" marathon even when you know you have to get up early the next day for an important meeting at work. Now is so much more important than later in our irrational minds, it can very difficult to make the responsible decision.

This, of course, is why it is so very easy to get into credit card debt and so difficult to dig out of it. Yes, your future self might need to work overtime every week to be able to make the payments on your credit card, but your now self really wants the big screen TV. Card issuers understand this quirk of human irrationality very well, and they do everything they can to appeal to our “I want it NOW!” tendencies.

3. Triggering Your Restraint Bias

Most people tend to overestimate their own impulse control; they believe that they will be able to show more restraint in the face of temptation than is realistic. This cognitive bias is why your grand plans to lose 20 pounds are often derailed by the first box of doughnuts you see. You have overestimated your ability to be virtuous in the face of temptation.

One way that credit cards use this cognitive bias is by offering to raise credit limits. While some consumers are capable of ignoring that temptation, there are others who will run up their balance to the new limit, even after they have convinced themselves that they can easily handle that much credit.

Another common strategy that triggers the restraint bias is the 0% balance transfer. In these cases, cardholders convince themselves that they can pay off the balance before the end of introductory period. However, many of those who take advantage of these offers are unable to show the restraint necessary to pay off their balance before the interest starts accruing.

4. Making You Fear a Loss of Perks

Many credit cards offer perks, from cash back to travel miles to money for college. The problem with these perks is that in many cases, cardholders are spending much more in interest than they are earning through the perks. Why would they do something so clearly irrational? Because of loss aversion.

Behavioral economists have discovered that human beings tend to irrationally overvalue something they already own or have. For example, plenty of investors have held onto tanking stocks for far too long because they are afraid of losing their original stake. They irrationally hope that the clearly dead investment will recover.

Loss aversion is also the reason why cable companies are happy to offer customers a free trial period of premium channels; viewers are much more likely to pay money to keep from losing something than they are to buy it in the first place.

And of course, loss aversion is a major reason banks offer credit card perks. While cardholders who pay off their balance each month are certainly making money on the perks, the majority of cardholders are not able to do that. If they were, banks would stop offering the perks because they would be the ones losing money.

For most consumers with perks credit cards, the fear of losing the airline miles will keep them charging on a card that they probably should have cut up long ago. They are afraid of losing that “free” flight, even though they are clearly paying for it.

Beware Your Irrational Brain

It can be difficult to responsibly use credit because our irrational brains and the manipulations of the credit industry are working against us. The best way to handle credit is to make sure you are conscious of your decisions and your irrational quirks before you whip out the plastic.

source: wisebread.com

How to Improve your FICO Score

It is important for you to understand that trying to raise your FICO score is quite similar in nature to losing weight. There is no quick fix and it is absolutely going to take time. Quick fix efforts for improving your credit score can most certainly back fire if you are not careful. The best advice for you to follow is simply to manage your credit in a responsible manner over a period of time.

Tips for Payment History

1. Make sure that you are paying all of your bills on time. When you have delinquent payments or accounts in collection, you could be putting a serious negative strain on your FICO score over all.

2. If you have missed any of your payments, then you need to get current and you need to stay current. The longer that you manage to pay your bills in a timely manner, the better your credit score is going to be.

3. Understand that paying your collection account off is not going to remove it completely from your credit report. The delinquent collection account is going to sit on your credit report for a period of 7 years before it disappears.

4. Understand that if you are having trouble when it comes to making ends meet, legitimate credit counselors and working with your creditors may actually help you. You may not be able to improve your FICO credit score on an immediate basis, but you can begin to improve your management of your credit, paying on time, to improve your credit over time.

Tips for Amounts Owed

1. You need to keep your balances low on your credit cards and other types of revolving credit as well. When you have high outstanding debts, this can have a negative impact on your credit.

2. Make sure that you are paying debt off rather than simply moving it around. Pay your debt down and you will surely improve your credit score over a period of time.

3. Do not close out any unused credit card accounts because it is not going to raise your score in any way but rather may actually hurt you in the long run.

4. Do not open a bunch of new credit cards if you do not need them because this strategy is not going to improve your credit score. This approach could quite possibly backfire, lowering your credit score as a result.

Credit History Length Tips

1. If you have only been managing your credit for a short period of time, do not open too many accounts too quickly because too many new accounts will lower your average account age. This could have a serious impact on your credit score in a bad way.

source: richcreditdebtloan.com

Federal Loan Consolidation: Key Qualifying Aspects to Consider

It is common practice to see federal governments invest in the future of its population. An effective way to do so is through providing loans, either to encourage or sustain growth in industries and in education, but there is a drawback. These loans create debt, and sometimes those who benefit from the loans can struggle to repay them. The solution to the problem? Federal loan consolidation plans.

Consolidation can rescue a borrower from bankruptcy court. There are many reasons why a borrower might find it too difficult to repay the loans they have taken out, ranging from the financial impact of a weakening economy to the destructive impact of an act of God. Normally, securing loan approval depends on proving the ability to repay, but in these cases, proving an inability to meet existing repayment terms is essential.

The key to a bright financial future is to properly manage the debt created by federal loans. Even though these typically come at a lower interest rates than those charged by private lenders, consolidation can make a real difference.

Difference Between Federal and Private Consolidation Programs

Normally, there are two types of loans to take out: namely private loans and public loans. The terms can differ greatly, with private lenders seeking to make a profit on their investment and, for the most part, public or federal lenders not. With federal loan consolidation, the distinction is similar.

The differences are manifest in interest rates, with the federal option clearly less expensive due to the low interest rates that are charged, compared to those charged by private lenders. The result is that consolidation loans are much more affordable so, as long as an applicant qualifies, securing loan approval is no great problem.

The problem is that many business owners take out both federal loans and private loans, and mixing these loans in one consolidation plan is not always a good idea. This is especially true since the federal options have low interest and good terms anyway, so it is harder to improve on them than private loans.

Qualifying for Consolidation

Qualifying for a federal loan consolidation plan is pretty straightforward, with loan authorities requiring proof that the applicant is in financial difficulties. Help is granted only to those in debt to the federal government, and not to any other loan source. The chief sectors to benefit are agriculture and commerce.

The farming industry is known to be one of the most heavily supported in practically every country. And in the US, there is a wide range of loans available to aid the sector, including Farm Loans, Commodity Marketing Loans and Farm Storage Loans. These are issued through the FSA. Borrowers on these schemes qualify for a consolidation loan, but securing loan approval is reserved for those in the most serious situation.

Businesses operating in the commercial sector can also benefit from a long list of financing schemes designed to stimulate growth and employment. The range of federal loans includes Small Business Loans, Indian Loans for Native Americans, and Physical Disaster Loans for businesses that have suffered damage to property, infrastructure and facilities.

Criteria to Satisfy

Of course, meeting the stated criteria is essential if an applicant is to have any chance of securing federal loan consolidation. The good news is that this is not particularly difficult; all that is really needed is to prove financial difficulties. What is more, securing loan approval is dependent on the severity of the financial situation of the applicant, not their credit score, and on the ability to meet the restructured repayments.

The purpose of federal loans relate to aspects other than financial. For example, repairs may need to be made to a warehouse after a tornado hit town, or flooding damage may mean a business must close for several weeks. Federal governments are happy to provide support if it means people keep their jobs.

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Article Source: http://EzineArticles.com/?expert=Mary_Wise

Bankruptcy: Debt forgiveness for honest debtors

CONTRARY to what others may think, the majority of people who file for bankruptcy are honest, hard working people who simply need to get a fresh financial start.  Because life is not perfect, there are times when we are so way in over our heads in debt that filing for debt relief becomes unavoidable. Filing for bankruptcy is NOT a crime. If it was, our Congress would not have passed laws that allow people to do it. Our bankruptcy laws, although they have changed to keep up with the changing times, have been with us for many decades and it is safe to assume that they will always be an important part of our legal system.

The “fresh start” concept of Bankruptcy is based on the idea of forgiveness. The honest debtor who either has limited or no resources to pay back creditors is given a chance to start a new life free from the burden of debts. If you’ve ever been in a situation in your life where you have fallen behind on debts and you are being harassed by creditors day and night, you know what I mean.

And although some creditors may agree to work with you while you’re going through a time of temporary financial hardship, in most cases the time that they give you is too short to be of any real help. And once you start falling behind, it gets harder and harder to catch up with each passing month because your bills begin to “snowball” in a very short period of time.  Some people erroneously believe that even if they fall 60-90 days behind on debt payments that they will retain their good credit standing with creditors. Remember that once late payments are recorded on your credit report, whether 30, 60, 90 or more days being late, that negative information stays on your credit report for 7 years from the date last reported.  Most people who file bankruptcy already have a tarnished credit rating due to delinquent payments. In the long run, filing bankruptcy can actually help rebuild your credit. And it doesn’t take that long to rebuild credit, either. You’ve probably heard of people filing bankruptcy and then being able to buy a house in as little as 3 years.

Filing for bankruptcy protection can help you protect your home, car, bank account and other assets. In a Chapter 13 debt consolidation, even non-exempt assets can be protected as long as a fair plan is feasible to pay debts over 3-5 years.  And if all or almost all of your debts are credit card debts, you can pay 0% interest, reduce your monthly payment to a very low amount (in a lot of cases, lower than 50% of what you are currently paying) and get out of debt in as short as 3 years. Filing for bankruptcy protection can also stop foreclosure on your home or other real property, perhaps eliminate a 2nd mortgage (to make your home more affordable), stop wage garnishments, bank levies and stop even the IRS if you owe back taxes. By consulting with a knowledgeable bankruptcy attorney, you may find out about options you didn’t even think you had.


So if you find yourself in a tight financial situation after being laid off from a job, being sick, going through a divorce, a failed business, a family or personal emergency costing a lot of money, or any other situation that was beyond your control, don’t lose hope and there’s no need to feel embarrassed about your situation.  Instead, take action now by finding out if bankruptcy can help you get the fresh start that you need. To schedule an appointment with our office, please call TOLL FREE 1-866-477-7772. We have offices in Glendale, Cerritos, West Covina and Valencia.

source: asianjournal.com

Are your debt problems forcing you into bankruptcy?

ARE you having problems paying your debts? Are creditors calling you day and night threatening you with a wage garnishment, repossession or foreclosure? Are you starting to feel hopeless and depressed about your situation and don’t know where to turn for help?

The last few years have been tough for a lot of people. You may have suffered a job loss, foreclosure, lawsuit, divorce or other unexpected calamity and now find yourself overwhelmed with debt. You realize that your debt problems are not simply going to go away unless you do something about them but just don’t know where to start.

You have rights under federal law to file bankruptcy and get immediate relief from debt. Bankruptcy is nothing more than a legal remedy that allows you to regain control of your finances so that you can get back on your feet as quickly as possible. Of course, it is not the answer to all financial problems but when appropriate for your situation, it may be the only way for you to get out of the mess you’re currently in.

Although Congress enacted tougher bankruptcy laws in 2005, most people still qualify for debt relief, whether they are wiping out debts under Chapter 7 or reorganizing under Chapter 13. Depending on your circumstances, your debts can be wiped out under Chapter 7 in only a few months or the Court may ask you to repay your creditors with lower monthly debt payments over a 3-5 year period. Either way, the goal is to help you recover financially and help you start a new life free from the burden of excessive debt.

Briefly, Chapter 7 allows you to cancel or discharge your debts but in return, you must give up whatever non-exempt assets you may have. The good news is that most people don’t have much and whatever little they have, they are often protected by the exemption laws in bankruptcy. So it is a misconception that “once you file bankruptcy, you will automatically lose everything.” The truth is that most people keep everything they have (homes, cars, bank accounts, retirement plans, etc) and they lose nothing at all. An experienced and knowledgeable attorney can evaluate your case and help you plan so that you can maximize your exemptions and claim the full benefits allowed by law.

Chapter 13, on the other hand, is a debt reorganization or debt consolidation plan. The court requires you to submit all your income information as well as a monthly budget to assess your ability to pay. Your Chapter 13 plan payments will be based on the surplus income as determined by the Court. Chapter 13 allows you to keep valuable property such as your home or car (although you were behind on your mortgage and car payments at the time of filing) and will stop foreclosure and repossession immediately on the day your case is filed. Credit card debts are included in your monthly payment under Chapter 13 and, in most cases, they can be significantly reduced or even totally eliminated.

If you have a 2nd mortgage on your property that is wholly unsecured due to the fact that your property is “upside down”, you may even qualify to reduce or eliminate it in Chapter 13 through a process called “lien stripping”. This can help a lot of people who are struggling with more than one mortgage payment as it makes their home more affordable while at the same time reducing what is owed on the property. This is something that even a loan modification will not be able to do as principal reductions are very rare when doing a loan modification.

The only way to know if bankruptcy is right for your situation is to consult with a professional who has the knowledge and experience to advise you regarding your options under bankruptcy law. For a free office consultation, please call Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos, West Covina and Valencia.

source: asianjournal.com

In Prosecutors, Debt Collectors Find a Partner

The letters are sent by the thousands to people across the country who have written bad checks, threatening them with jail if they do not pay up.

They bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

The practice, which has spread to more than 300 district attorneys’ offices in recent years, shocked Angela Yartz when she was threatened with conviction over a $47.95 check to Walmart. A single mother in San Mateo, Calif., Ms. Yartz said she learned the check had bounced only when she opened a letter in February, signed by the Alameda County district attorney, informing her that unless she paid $280.05 — including $180 for a “financial accountability” class — she could be jailed for up to one year.

“I was so worried driving my kid to and from school that if I failed to signal, they would cart me off to jail,” Ms. Yartz said.

Debt collectors have come under fire for illegally menacing people behind on their bills with threats of jail. What makes this approach unusual is that the ultimatum comes with the imprimatur of law enforcement itself — though it is made before any prosecutor has determined a crime has been committed.

Prosecutors say that the partnerships allow them to focus on more serious crimes, and that the letters are sent only to check writers who ignore merchants’ demands for payment. The district attorneys receive a payment from the firms or a small part of the fees collected.

“The companies are returning thousands of dollars to merchants that is not coming at taxpayer expense,” said Ken Ryken, deputy district attorney with Alameda County.

Consumer lawyers have challenged the debt collectors in courts across the United States, claiming that they lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases. The district attorneys are essentially renting out their stationery, the lawyers say, allowing the companies to give the impression that failure to respond could lead to charges, when it rarely does.

“This is guilty until proven innocent,” said Paul Arons, a consumer lawyer in Friday Harbor, Wash., about two hours north of Seattle.

The partnerships have proliferated from Los Angeles to Baltimore to Detroit, according to the National District Attorneys Association, as the stagnant economy leaves city and state officials grappling with budget shortfalls. Lawyers for the check writers estimate that more than 1 million of them are targeted a year. The two main debt collectors — California-based CorrectiveSolutions and BounceBack of Missouri — return millions of dollars each year to retailers including Safeway, Target and Walmart.

While the number of bounced checks has fallen as more shoppers pay with credit or debit cards, Americans still write billions of dollars worth of bad checks each year. In 2009, $127 billion worth of checks were returned, according to the most recent data from the Federal Reserve. That’s down from $182 billion in 2006.

Because the cases are not fully investigated, there is no way of knowing whether the bad checks were the result of innocent mistakes or intentional fraud. The so-called bad check diversion programs start from the position that a crime has been committed.

Before the first partnerships were rolled out in the late 1980s, merchants who received a bad check typically tried to retrieve the money themselves or through a private collection company, with abysmal results. Those merchants who suspected fraud could send along the checks to their local district attorneys.

The influx of bad-check reports overwhelmed district attorneys’ offices, according to Grover C. Trask, a former district attorney in Riverside, Calif., considered the father of such programs. “It was a way to deal with a fairly serious nonviolent crime going on in the business community, but not overburden the court system or the resources of the district attorneys,” Mr. Trask said.

The programs were quickly challenged by consumer lawyers, who took aim primarily at California-based American Corrective Counseling Services. Facing a barrage of class-action lawsuits, the company reorganized through a Chapter 11 bankruptcy in 2009.

Still, its successor, CorrectiveSolutions, which says it has contracts with more than 140 prosecutors, has been dogged by similar legal challenges, including a class-action lawsuit pending in federal court in San Francisco that claims the company “has constructed an elaborate artifice” to terrify borrowers into paying. CorrectiveSolutions, which did not respond to requests for comment, has contested the claims, court filings show.

For the collection companies, the partnerships offer a distinct financial benefit: the “financial accountability” classes. Typically, a small portion of the class fees, which can exceed $150, are passed on to the district attorneys’ offices. Check writers are led to believe that unless they take the courses, they could end up in jail.

A letter signed by the Santa Clara County district attorney, for example, informed Kathy Pepper that the “bad check restitution program” would allow her to avoid “the possibility of further action against the accused by the District Attorney’s Office.”

Petrified, Ms. Pepper agreed to pay $170 for a class and another $25 to reschedule the class last year after accidentally writing a $68 check in the midst of a divorce last year that upended her finances.

What Ms. Pepper did not know was that her bad check was sent directly from the merchant to the debt-collection company, without any prosecutor determining whether she had actually committed a crime.

Under the terms of five contracts between CorrectiveSolutions and district attorneys reviewed by The New York Times, merchants refer checks directly to the company, circumventing the prosecutors’ offices. While the merchants are required, for example, to attempt to contact the check writer, they can send any bad checks to the collection companies if the shopper hasn’t responded, typically within 10 days.

“No one at the district attorney’s office reviews the cases” before the collection company sends out letters, said Priscilla Cruz, an assistant director in the Los Angeles district attorney’s office.

As of July, CorrectiveSolutions had sent out 16,955 letters on behalf of the Los Angeles district attorney, and during that time 635 people attended the program’s classes, county data show. While few people will be prosecuted for not attending the class, there is a possibility of charges, Ms. Cruz said.

While the percentage of targeted check writers taking the classes is low — 4 percent to 7 percent in recent years — the percentage of cases referred for potential prosecution is much lower, about 0.10 percent.

Few bad-check writers are prosecuted, especially for relatively small sums, lawyers say, because it is hard to prove the person meant to defraud the merchant.

Gale Krieg, a vice president at BounceBack, said he has turned down business from prosecutors who won’t agree to at least have all copies of the checks sent to their offices, where prosecutors can determine if a crime has been committed. Mr. Krieg, who said the company has contracts in 38 states, acknowledges the limitations: “Whether they exert oversight isn’t something that we can control.”

Prosecutors point out that people who write bad checks should be held accountable for paying back what they owe.

“I view it as quite a win-win,” said Baltimore County State’s Attorney Scott D. Shellenberger. “You aren’t criminalizing someone who shouldn’t have a criminal record, and you are getting the merchant his money back.” On its Web site, CorrectiveSolutions says that its classes result in low rates of recidivism.

Some officials in district attorneys’ offices have quietly raised concerns that the programs are misleading. A November 2009 county audit of Deschutes County, Ore., titled “District Attorney’s Office-Cash handling over revenues,” wondered whether elements of the program could be “disingenuous.” The prosecutor’s office, which did not return requests for comment, contracts with CorrectiveSolutions to handle its bad checks. Ms. Yartz said she accidentally wrote a check for groceries on her credit union account, rather than her bank checkbook. She had recently moved and was in the process of closing that account.

Even after Ms. Yartz paid $100.05 in February to cover the bounced check, the returned item fee and an administration fee, she got a letter signed by the Alameda district attorney informing her that her remaining balance was $180 for the class. After consulting with a lawyer, she decided to take her chances rather than pay for a class she could not afford, to avoid being punished for a crime she said she did not commit. Ms. Yartz also questioned the need for a class on budgeting and financial accountability: “If I meant to bounce this check like a criminal, why do I need a class on budgeting?”

source: nytimes.com

10 facts on debt forgiveness on your main residence mortgage

1. AS A general rule, debt forgiveness results in taxable income.

2. You may be able to exclude debt forgiven on your principal residence under the Mortgage Forgiveness Debt Relief Act.

3. The debt must be secured by your main residence.

4. The debt must have been used to buy, build, or substantially improve your principal residence

5. Debt forgiven on second homes, rental property, business property, do not qualify for this tax relief provision (but may qualify for other tax relief).

6. Refinanced debt qualifies if proceeds are used to improve your principal residence.

7. Refinance debt proceeds used for other purposes (travel, buy a car, or pay off credit card debt) do not qualify for the exclusion.

8. The exclusion amount is limited to $2 million ($1 million for a married person filing a separate return).

9. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

10. If your debt is reduced or eliminated, you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. The form shows the amount of debt forgiven and the fair market value of any property foreclosed. Examine Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

source: asianjournal.com