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tips for financial planning

Can Bankruptcy Really help?

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Many times, debtors aren’t sure whether filing bankruptcy will really help their situation or hurt them. The word bankruptcy has a tinge of negativity to it. History shows that the word comes from the Latin terms bancus (a bench or table), and ruptus (broken). Additionally, Italians have been known to use the word “bancarupta”which means bench broken or bank broken quite often when a banker/tradesman could not make good on his debts. So it is understandable when people try to find other ways to fix their financial problems other than going bankrupt. Many will use up all of their retirement savings just to avoid bankruptcy. Many do not understand that bankruptcy does provide protection. Protection from unscrupulous creditors and a way to protect a debtor’s assets. Spiritually, Deuteronomy, Chapter 15, Verses 1-2 says, “1 At the end of every seven years thou shalt make a release. 2 And this is the manner of the release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the LORD’S release.”
Bankruptcy is financially non-discriminate. It provides relief for those who, through no fault of their own, have fallen on hard financial times as well as those who have abused their financial advantages. There are, of course, exceptions where people have either broken or abused the rules. Bankruptcy provides a way to clear out the financial baggage that many carry and release the stress that builds from that baggage. Stress, one of major causes of health related problems, can break relationships and friendships, as well as a person’s fortitude. Relief from that stress can help a debtor regain his will to move forward – to recover.
Bankruptcy is not something that should be taken lightly. It does carry some liabilities but none that cannot be overcome. Recovery from a bankruptcy filing generally takes about 2 years. Notions that bankruptcy can ruin a person’s credit forever are groundless. Many have filed, found the relief that they so desperately needed and have moved on to a more financially stable life. Just ask the roughly1.5 million who filed last year.

What about Consumer Credit Counseling? – Credit Counseling Atlanta Georgia

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What about Consumer Credit Counseling?

Over the past few years, a popular alternative to bankruptcy has surfaced. Consumer Credit Counseling Services (CCCS), a nonprofit organization financed by credit card companies and other consumer finance organizations, works with you to reduce some of your debt and create a plan to pay off the rest of your debt without the intervention of the Bankruptcy Courts. If your debt is not too overwhelming and you have sufficient income, CCCS may be able to create a payment plan that allows you to pay back your debts over time.

While CCCS is an excellent organization, they may not be able to help if you are behind with your car or house payment. Their concentration seems to be on the handling of your credit card. Please note that CCCS is an organization created by credit card companies and their mission is to assist you in paying back all of your credit card debt. CCCS counselors are not attorneys and they are not required to discuss with you bankruptcy or other options, although I have had some clients advise me that CCCS advised them that bankruptcy may be their only option.

CCCS is not the only “credit counseling service” out there. You may have seen advertisements in the phone book, on television ads, through unsolicited mail or even nailed to a telephone pole. Some of these services offer to clear your credit file or to get you a new credit file. Usually, these organizations are rip-offs and you should avoid them. A good rule to follow is “if it sounds too good to be true, it probably is.”

Finally, if you do attempt to get your financial life under control, realize that it will take a great deal of both discipline and money to pay off substantial credit card debt. Let’s say you have $10,000 in credit card debt and you want to pay it off in two years, in order to accomplish this goal, you will need to pay $520 per month. Or if you take three years, you will need $382 per month. If you reduce the amount you are paying per month to $200, then that $10,000 will take over ten years to pay off.

Many clients tell me that they attempted to reduce the interest rate they were paying on their credit card debt only to find themselves even farther in debt when they miss one payment under that new rate. Credit card companies are notorious in jacking up the interest rate to over 25% if you default on a payment. Always remember to read your credit card small print to see how your account will be handled if you do default.

Remember, interest rates at levels of 18% to 20% will increase your balances immensely. You can figure out how long it would take you to pay off your debt by using an on-line calculator located at the Motley Fool financial web site.

11 Steps to a Safe and Happy Financial Future

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Step #1: It is better to have some good credit rather than all bad credit. When times are worst, try to keep one or two of your accounts current. The foundation for rebuilding your credit can hinge on those one or two good accounts.

Step #2: Stability is good. Try to avoid moving around too much.

Step #3: A co-signer may help you in re-establishing your credit.
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