Getting Out of Debt by David Lorenson

If your monthly debt payments, excluding mortgage or rent, exceed 20% of your income, your debts are a serious problem requiring action. Here are some basic alternatives for getting out of debt:

Credit Counseling The Do It Yourself Approach Debt Management Program Debt Consolidation Bankruptcy Debt Elimination ProgramCredit Counseling After conducting your financial analysis and budget, your counselor might suggest that the do it yourself approach, which will include completing self-help educational programs on budgeting, money management, and credit. By going it alone, you may be negotiating with your creditors, paying off debts with the highest interest rates first, obtaining a second job and cutting up your credit cards. While this way is certainly very effective, it is important to note that this requires self-confidence and self-discipline to follow this approach and follow through to completion.

When negotiating with creditors, you will find that some are willing to negotiate lower payments or interest rates, or waive late charges and other fees, because they realize that it’s better to receive some of the money owed than none of it. But you will have to ask yourself if you have the ability and temperament to conduct difficult, time consuming negotiations alone.

Debt Consolidation In a typical debt consolidation, you consolidate your existing debts and mortgage payment into one, larger mortgage payment, sometimes at a lower interest rate. You take out a loan, often using your home as collateral, the lender sends you a check and you pay off your creditors. But don’t fall behind–you could lose your home! People who chose debt consolidation are very likely to end up in 5-7 years again with high credit card balances with high interest rates.

If you have a habit of buying on credit and carrying large balances on your credit cards, debt consolidation won’t fix your underlying spending problem. Also, you remain solely responsible for paying your own bills and negotiating with creditors.

Bankruptcy Filing for bankruptcy should only be considered as an absolute last resort. Bankruptcy is a court action that stops lawsuits and any other attempts by creditors or collection agencies to collect from you. However, it comes with a high cost–it generally stays on your credit report for a full 10 years, causing extreme difficulty in using credit to obtain cars, home or other loans and can even restrict you from certain types of employment. Bankruptcy should never be thought of as a “quick” or “free” way to get out of debt, as it can completely destroy your credit worthiness for a very long time.

Chapter 7 Bankruptcy discharges virtually all of your consumer debts but does not eliminate secured debt, so you could still lose your home if you fall behind in your mortgage payments. You also will be required to pay such debts as student loans, alimony, child support, income taxes, and legal fines.

Chapter 13 Bankruptcy is used in special situations, primarily to allow the filer to keep his/her home. A court-appointed trustee oversees a strict repayment plan to pay off your debts during a period of three to five years.

Although bankruptcy may fix your short-term problems, because it stays on your credit report for so long it should only be used in extreme situations. Many people who file bankruptcy make the mistake of doing so without fully exploring their options, and never realize they have other, more viable choices that will allow them to preserve their credit standing.

Debt Elimination Program Over the past several years, Debt Relief Educational Services (DRES) has been servicing individuals who have unsecured debt (primarily credit card debt). DRES accomplishes this by providing powerful choices to our members. These choices provide them with the best alternative solution to bankruptcy, consolidation, and other remedies that have been proven to be detrimental to their financial situation. To date, DRES has helped thousands of people obtain significant debt relief and restore an incredible amount of freedom back in to their lives!The procedures that allow DRES to accomplish its objectives have been working successfully for over five years now.

The staff at DRES includes: Former bank compliance division experts and Resource and Financial Education Specialists who have personal experience in utilizing these procedures from start to finish. These procedures include consumer remedies based on 12 C.F.R. (Code of Federal Regulations), the Fair Credit Billing Act, which is taken from Title 15 of the U.S.C. (United States Code) and other applicable federal laws. Additionally, for people with credit concern issues, DRES provides an educational tutorial based on consumer protection laws as well as a partnership with the nations leading credit repair organization.

DRES takes a cutting edge approach into an industry which is greatly untapped. There are millions of Americans who suffer from having too much unhealthy debt in their lives. DRES offers an opportunity for people to recapture an enormous part of their personal and financial freedom by eliminating this condition.

Conclusion: Know that you have options for getting out of debt, and explore them fully. The key is finding the right solution for you.

About the Author David Lorenson is a senior debt solutions consultant with Debt Relief Educational Services (DRES). DRES provides a program that is the #1 Alternative to Bankruptcy and Refinance. Learn how to reduce your credit card debt by 75% or more. This program eliminates credit card and unsecured personal loans legally, ethically and morally. See his website at http://www.4creditcardhelp.info.

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Posted by Linda- Home and Garden Ideas as Personal Finance: Bankruptcy at 11:07 PM EDT

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How to Restore Your Credit after a Bankruptcy By Anthony Kirlew

It is unfortunate that many bankruptcy attorneys do not give their clients more direction with regard to restoring themselves after their bankruptcy. There are some simple steps that anyone who files a bankruptcy needs to take in order to restore themselves financially.

Using these steps below, you can restore your credit and prepare yourself to become a home owner.

1. Get a copy of your credit report. Many times (most times) the credit accounts that are absolved with your bankruptcy are not removed from your credit report immediately.

2. Have derogatory credit items removed from your credit report. For the items charged off in your bankruptcy, you will need to send a copy (not the original) of your bankruptcy discharge papers to all 3 of the credit bureaus asking them to remove these inaccuracies.

3. Pay all of your bills on time. Bankruptcy is a means to financial recovery. It is intended to allow you to “start over” financially. After your bankruptcy, you need to make sure that all of your bills are paid on time. If you are having trouble with an upcoming bill, DO NOT IGNORE IT. This is where most people go wrong. Call your creditors before they call you and let them know what your challenges are. If you can’t get a reasonable rep on the line, ask for a supervisor, but again, do this as early as possible, not the day the bill is due or after it is late. If you are having trouble with your bills, you may need to solicit some help.

4. Have a strong documented rental history. This is pretty critical, as it is most likely the largest monthly expense that you have. Underwriters (the people that actually sign off on your loan’s approval) will look very hard at how you have paid your rent as they are going to replace it with a mortgage payment of equal or greater size. It is very important to be able to document your rent payment history very specifically. If you rent from an apartment community, then all the bank will have to do is request a Verification of Rent (a.k.a. VOR).

If you have a private landlord, then the BEST way to document this is with cancelled checks for the last 12 months rent. Banks can do VOR’s for private landlords, but rarely do because they feel that a landlord may have a relationship with the borrower and say what the bank wants to hear to help them get a loan.

If you pay with cash or money orders, please stop doing this immediately and start paying with checks. Simply put, this is hurting you because by filing a bankruptcy you have already shown some financial instability. Paying your rent with cash or money order shows further financial instability and will not give you the positive rent history that the underwriter is looking for to give them the confidence in approving your loan.

1. Apply for a secured credit card – A secured credit card allows you to make a deposit into an account to secure a credit card and then borrow against it to establish a new positive payment history. As time progresses, the bank may increase your credit line to an amount greater than your deposit, and then eventually return your deposit to you. (They will also often pay you interest on your deposit.)

2. Prepare “non traditional” trade references – These are accounts that you pay on such as cell phones, car insurance, and store accounts which can be used to document a positive payment history, but would not be traditionally reported to a credit bureau. Ideally, if you can provide 3 of these accounts with a 12-month payment history, this will help us in convincing the bank that you are a good credit risk. The best way to document this is with a letter from the company stating that you have had a positive payment history with them for the past 12 months. Alternatively, you can provide 12 months of cancelled checks showing 12 months of timely payments.

3. Resist the urge (or encouragement) to buy a car. Some may tell you that this is the best way to rebuild your credit. The problem is that your interest rate will be so high, that your payments will make your debt ratios higher than normal, making it harder to qualify for a mortgage. Do you remember the figure of 45-50% of your monthly income that the bank will allow you to use towards your debts? This will quickly be absorbed by a car payment. Only buy a car if a) you NEED (not want) a car, and b) you have the income to cover the car payment, any of your current debts, and your proposed new car payment. We have seen SEVERAL people that have cars rather than homes because they went out and bought a car that they could not sell and their debt ratios were too high to qualify for a mortgage. It would be a shame to have a nice car (that depreciates daily), as opposed to a more humble car along with a mortgage on a home that gives you a tax break, and increases in value over time.

I hope this is helpful and helps get you on your way to finding the home of your dreams.

Anthony Kirlew is an entrepreneur, author, and mortgage industry veteran and is the founder of Bankruptcy Home Loans. Over the past several years, he has helped countless individuals and families obtain mortgages even in the most desparate financial situtations.

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Posted by Linda- Home and Garden Ideas as Personal Finance: Bankruptcy at 7:47 PM EDT

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