I Was Crippled by My Debt! Then I Was Saved By The Program

Increasing numbers of Westerners are becoming trapped in a cycle of debt, often ignoring the situation until it is almost too late; once you have admitted that there is a money problem, you can start making arrangements to clear the debts.

So the sooner you sit down and recognize that you need to do something, the quicker your debt relief will start. Debt has become a major problem in many countries but it is important to reduce debt burdens seriously if you do not want to live with less worry.

The most important thing to remember is not to panic and stay focused as this way your decisions will be clearer and more positive. Although hard, it will pay you in the long term to continue to make your monthly repayments on any loans and find other ways to save money.

The easiest way to approach this is to calculate everything you have to pay out regularly both necessities and those inconsequential items that mount up each month. One hard action you will face is to slow down or stop the use of your credit card then start using cash again and you will find yourself being more careful.

You will be surprised to learn that spare money is available which can be put to good use; saving it as part of your debt relief solution, even if it takes a while for it to be worth anything.

By reducing the amount of entertainment you have on a regular basis will allow even more money to go into your fund and your debts will disappear faster.

No-one really wants to increase their mortgage repayments but many homeowners see their only option is to refinance their home which can work but just increases the amount you pay in the long term. Before you go down this route you must think about why you want this option when there are others that can be used.

In the short term, withdrawing cash from a credit card to make a payment may seem to make sense but over a prolonged period it will just increase the debt. If re-financing your home does not work then you must consider filing for bankruptcy but this step should not be taken before you take specialist advice from a bankruptcy attorney.

Some people are able to bypass bankruptcy with the money in their individual retirement accounts (IRA) but such an act can seriously affect your financial future. Should you decide to use your IRA then be aware of how it will affect your long term financial future and you may just reconsider this as a method of debt relief.

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Household Budgets: The Secret Weapon in the War on Debt

Ah, America...land of the free, home of the indebted. According to CNNMoney.com, the average American household has almost $9,200 in debt. That's the average. Some have much, much more. Interest rates generally run in the mid to high teens, so counting interest and payments on other debt, such as mortgages, the average American is dealing with a heavy debt load.

So what can you, Mr. or Ms. Average American, do to get yourself out of this nasty situation? The first step, which may be the most uncomfortable, is the most critical: get your life under control!

And that means preparing a household budget.

A successful business prepares a budget. It attempts to anticipate funding needs going forward, and then does its best to stay within the budgeted amount for its expenditures. You probably have an advantage over most businesses in that you have great foresight in anticipating your financial needs. You know what you typically spend in a given month on various things such as food, clothing, utilities, and rent or mortgage. If you don't have an idea of what you spend on these things, take a look at your checking account registry, or your online checking account information. Your past financial dealings are right there for you to see.

It may also be helpful to use a financial tracking application such as Microsoft Money. You can find out more about Money at http://www.microsoft.com/money/. These types of applications are excellent for becoming more aware of where your money goes. A free online application that is designed specifically for improving your awareness of your spending patterns is http://mint.com. The application automatically labels many of your expenses and lets you classify expenses any way you want. One unique feature of the site is that it lets you compare your spending to the spending habits of people in any city, state, or nationwide.

Just becoming aware of how you spend your money will greatly increase your power. You will likely find yourself becoming less prone to wasting money once you develop this awareness. Once you have a handle on where you money goes, the next step is controlling where it goes. And for that, you need a budget.

The first items in your budget should be the necessities - expenses that are not optional. These would include things like your house payment or rent, electricity, water, car payments, gas so you can get to work, and food. Many financial experts recommend that you pay yourself before paying anyone else, and by that they mean you should take 10% (or however much you can afford) and put it in savings or an investment account. However, if you don't have a roof over your head or food in your stomach, then saving is a moot point. So for purposes of creating your first realistic budget, I recommend that first you take out the necessities. Necessities, of course, vary greatly from the mind of one person to the next, but think of it in terms of BARE necessities - things you absolutely have to have to survive.

If you're really, really serious about getting out of debt, you might want to take a hard look at those car payments. If you could get by with something less, and you're not "upside down" (meaning you owe more than the car is worth), it probably makes a lot of sense to sell and downgrade. It will likely save you some money on a monthly basis, and may even put some immediate cash in your pocket.

Next, take out 10% for your savings. If you can't afford 10%, allocate SOMETHING. But strive for the magic 10%. It is also recommended that you allocate another 10% for charity. This may be an item you leave off until last, but many good things happen to those who are willing to give away some part of their income with nothing expected in return.

After savings and possibly funds for tithing, factor in your debt payments. Yeah, this is when you start to feel the pain. There are steps you can take to help ease the situation, such as debt consolidation. Another strategy is to pay off your debts in ascending order of size; i.e., pay off your smallest debts first, as fast as you can. As debts are paid off, add the amounts you were spending on those debts to what you pay to service larger debts. It's a snowball effect, whereby over time you end up paying larger and larger amounts on your biggest debts in order to get them paid off faster.

Next, factor in your non-necessities. This is where you really have to take a hard look at your life. Are you spending too much money on entertainment? Alcohol? Clothes? Fancy cars (as discussed above)? If you are serious about getting out of debt, then you've got to scale down these types of expenses. Just becoming aware of how much you spend on non-necessities may shock you into action. You should budget for these types of expenses, but cut them back, and allocate the remainder for debt repayment.

The final step in preparing your budget is to write down your income, and make sure everything balances out. You can't spend more than you make (that's probably how you ran up all that credit card debt to start with). If your expenses are too high, start cutting back on the non-necessities. In the end, you'll have a nice, balanced budget.

Once your budget is in place, you've got to find a way to stick to it. One recommended strategy is to use a cash system. The problem with the way money is handled today is that it's just too easy to spend it. Just whip out your debit card. No cash required. No check book and no ledger entry required. But you quickly lose track of how much you're spending. The solution is to allocate your budget requirements into cash categories. Literally put cash into envelopes every month for various categories of expenses. You will be less likely to spend money needlessly if you literally see your pile of cash getting smaller. And you will have much more clarity about your financial situation.

If you follow these steps, it can have a profound impact on your life. You can get out of debt quicker, take control of your finances, and feel much better about yourself. It's all up to you. And it all starts with a budget.

ClearOne Debt Relief is a full-service debt management company providing debt settlement services such as credit card debt relief to hundreds of thousands of customers. We help people cut their debt in half, lower their monthly payment, and get out of debt in as little as 24 months.

Debt Collections: How To Pay Off Accounts In Collections

Next to bankruptcy, having an account in collections is the worst entry you can have on your credit report. It will lower your score, and make it difficult- if not impossible- to obtain new credit. Creditors realize that if you have an account in collections that it went unpaid for a long period of time, and it makes them fear that if they lent you money they would not receive payments on time, either. Once you have an account in collections, your goal is to improve your credit and get the collections accounts deleted, or at the very least, updated on the credit report to say "Paid as agreed", "Current", or "Settled".

The damage is done the moment the account is reported as being in collections. Before you pay off that collection account, you want to negotiate with the debt collector to have the credit report updated to one of the more favorable notations, as described above. You do not want to deal with the nightmare that many people face because they didn't negotiate with the creditor and get the intention in writing for the update of your credit report- some people have paid accounts off that are in collections and their credit report is not updated. For at least seven years after the account is paid off; the individuals end up having problems getting new credit because the account still appears in negative status on the credit report.

The Best Scenario for You

The best you can hope for in terms of improving your credit is to have the collector delete the account from your credit report entirely. Send a "pay for delete" letter to the collector, and offer a settlement payment that you will pay them in exchange for the deletion of the account from your credit report. Get the collectors response in writing before you make a payment, to be sure you have proof of the arrangement in the event they don't follow through with their end of the bargain.

If you prefer to call the debt collector, you chance being recorded saying something that can be used against you in a judgement case. You'll want to get the agreement from the collector in writing anyway, so it's a good idea to do this in writing anyway.

Debt collectors do not have to remove accurate entries from your credit report, even if you offer a settlement, so not all debt collectors will agree to this scenario.

Second Best Scenario for You

There are a number of collectors who will hold out in hopes of getting the payment in full and will refuse to delete the account from your credit report in exchange for a settlement (less than amount owed) payment. If this is your situation, you'll have to offer to pay the full amount to get the collector to delete the account from your credit history report.

Not as Good, But Acceptable!

There are some collectors who simply refuse to remove an entry from your credit report, even when you've made payment. You would then want to get the collector to agree to update the notation to "Paid in Full"; whether you make a settlement payment or the full amount.

Unfortunately, a number of collectors won't report it as "paid in full" if you settle. If you get the debt collector to agree to a settlement payment, but not "paid in full", it would still be acceptable and better than your current situation to have the account reflect "Paid- Settled" on your credit report. It will not result in an instant, huge boost in your credit score, but it is certainly better than the situation you're in now (having the account in collections) and is the best alternative if you can't get it deleted or marked "Paid in full" for making a partial payment. (If you have the money to pay the account in full, do it because the notation on your credit report for an account paid in full is much better for you over the long term!)

This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com

Use The Statute Of Limitations Of Debt To Your Advantage

Debt collectors do not have an indefinite period of time to continue trying to collect payments from old debts. There is an "expiration date", called the Statute of Limitations, that prevents debt collectors and/or the original lender, from pursuing you for the rest of your life on old debts. Before you go ahead and send in a payment on an old debt, check to be sure that the statute of limitations hasn't expired. If the expiration date has passed, you may be protected by law and not liable for that debt.

Use the Statute to your Advantage

The statute of limitations starts for the date of "last activity" on the account, as presented on your credit report. This is not always the last date of your payment. If you've communicated with the debt collector beyond the date you made the payment, and they've updated your credit report to show the new date as the date of last activity, the statute of limitations will start from that date.

Sometimes the statute of limitations has expired but debt collectors continue their attempts to collect because they hope the debtors do not know about the statute and that they'll pay with enough threats. If you are 100% certain the statute of limitations has expired, you can simply ignore them. If a lawsuit is brought against you, you'll have justification in that the time limit has expired for the collection of that debt.

If you enter a payment agreement, talk to the collectors or promise to make a payment; you will restart the statute of limitations to day one!

How Do You Know Your Statute of Limitations?

Each state has a different time period that collectors are allowed to pursue the collection of old debts. Check The Statute of Limitations on Debt for your states statute of limitations. Keep in mind if you move from one state to another, the debt collector may attempt to restart the statute of limitations for the new state; or extend the time period under the laws of the new state if they happen to be longer!

What the Statute of Limitations Can't Do For You

Many people think the statute of limitations is their free ticket out of repaying a debt. Unfortunately, while it can help it certainly is not the magic solution.

It cannot:

* Prevent the debt from being reported on a credit report. The reporting of bad debt follows the credit reporting time limit allowances, so even if the debt has passed the statute of limitations, it can appear for several more years and affect your credit score.

* Erase debt. If you really owe that amount, the statute of limitations doesn't indicate that you don't owe the debt.

* Prevent a debt collector from filing a lawsuit against you. They will not be able to win (in most cases!) if the statute of limitations has passed, but you may still have to go through the ordeal of a court case.

This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com

Do You Owe A Debt To The Federal Government?

After you throw the cap and gown into the air and strut down the aisle, you may not be thinking about the debt you will have to repay. It comes in the form of a prepayment booklet of sorts in the mailbox.

Finding yourself in debt is not a fun experience for anyone, but finding that you owe the government money and are behind in the payments can be devastating. For those facing bad federal debt, relief may be available in many forms, but caution must be exercised when deciding which road to travel. Some of the avenues with signs pointing to bad federal debt relief may simply be a detour to additional financial anxiety.

There are two major areas that can produce federal debt for individuals, being behind in paying their income taxes and defaulting on federal student loans. Legal troubles can also add to the debt if federal fines have been added to a criminal history. However, for the vast majority of individuals bad federal debt relief is about finding ways out of owing tons of money in past due taxes and fines as well as over due education loans.

While bankruptcy is the most efficient tool for eliminating unsecured debt, new federal laws, as well as the old ones, do not allow for bad federal debt relief on money owed for taxes and defaulted school loans. There are certain circumstances in which a portion of past due taxes may be included in a petition for bankruptcy, but a lot depends on how long the debt has been owed and amount that has accumulated.

There is No Such Thing As A Free Education, we all wind up paying for it sooner or later!

In the recent past, many students would take out federally insured student loans for their higher education and after graduation, before they starting working would file for bankruptcy, leaving their Uncle Sam holding the bill for their education. Today, eliminating this bad federal debt relief on loans on which they have defaulted is considerably tougher. It is alot harder to walk away and not pay your dues. You borrowed it, now you must repay it. What you borrow in good faith must be repaid in the same way.

Before a student loan is even considered for bankruptcy, the student has to prove that being required to repay the loan would place them in a serious financial hardship. However, finding bad federal debt relief for student loans is often made tougher through bankruptcy, with the government arguing that with all other financial obligations removed through the court, the hardship of paying back the loans is reduced.

Similar to bad loans in the private sector, when dealing with bad federal debt relief it is best to be in contact with the office to which the debt is owed and try to make arrangements to minimize the affects of the potential collection process. In most cases, explaining how you arrived in the current position and what you are doing to recover is usually enough to find at least temporary bad federal debt relief. Don't ignore the notices, keep in close contact with them so they know you are not trying to abandonment your debt responsibilities.

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What Will You Do With Your Rebate?

In 2001, the US economy had entered a recession and the government issued rebate checks to most people in hopes people would run out and spend them and help stimulate the economy. While the effectiveness of that move haven't been proven one way or another really, congress is currently looking to run a similar program in 2008. The House and Senate have each come up with different rebate plans that are currently under discussion:

The House would like to pass a plan that gives $600 to each individual or $1,200 to married couples with an additional $300 per child. The amount of rebates would be decreased for individuals who make more than $75,000 annually or for married couples earning more than $150,000 annually.

The Senate is working on a plan with slightly lower amounts, with $500 given to each individual and $1,000 provided to married couples. This plan also would provide an additional $300 per child. While the amounts are a bit lower in the Senate's version of the rebate plan, more people would qualify for the money. The money wouldn't start phasing out until income levels are about twice the House limitations; and the Senate's bill for the rebates would provide money to people on Social Security as well as our disabled veterans- people who wouldn't qualify under the House version of the bill.

Before the bill can be placed on President Bush's desk for his signature, the Senate and House need to agree on a compromised version to present. If approved by the President, it would be unlikely for the Internal Revenue Service to issue checks until at least mid-May- until after the rush of the tax season has ended.

In 2001, research teams tried to decide what kind of impact the tax rebates had by looking at changes in the government's Consumer Expenditure Survey. It seems that somewhere between 20 and 40% of the rebates were spent in the first three months of receiving it; with almost all of it spent within nine months of receiving it. In a separate study, it was found that credit card debt dropped considerably soon after households received their rebates- but within nine months it had risen again as people began putting new debts on their credit cards.

What's interesting is the number of companies that have been polling people to find out what they'll do with their rebates if they get them. The idea is to spend it and stimulate the economy of course, to help pull us out of what could be a bad recession; but the polls are finding that the majority of people are looking to pay off their existing debt with the rebates. In fact, depending on the site offering the polls, I saw responses as high as 51% claiming they would use the rebate to pay off credit card and other debts; as as many as 36% claiming they would invest it into long term savings options.

Of course, what people say they're going to do with their money and what they really do with it are often entirely different things. Have you ever planned to save a portion of your paycheck and gone out to dinner instead? Probably everyone has made the "wrong" decision with their money at least a few times in their lives, despite having the best of intentions.

The polls looked at are by no means done scientifically as they're just based on visitors to a particular website; but it's still interesting to see how many people hope to pay off debt with their rebates. What would you do with yours?

About the Author:
This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com .

Should You Get A Mortgage Now?

It's never a good sign when your home loan company files for bankruptcy. Sadly, that's just what's happening to many sub-prime mortgage lenders these days. Mortgage rates are low right now (about 5.5% - 6% for a 15-year fixed interest loan at the time of this writing), but the lenders who managed to stay afloat are tightening their lending guidelines. Should you get a mortgage while the housing market is so volatile?

Simply put, yes, you should get a mortgage if you're in a position to afford a house. But it's not that simple. Before you sign that dotted line, you need to consider some things.

First, do your research. Learn about mortgages and mortgage professionals. If you get a good offer, don't assume that it's the best you'll get. Shop around and compare offers. You might find that that initial offer wasn't as great as it seemed. Compare the terms you're offered to the current national mortgage rates. You can find these online at My FICO. By familiarizing yourself with what's out there and with what can be expected, you're protecting yourself from scams.

Mortgage scams are a problem, but they can be avoided. Just remember that mortgages that seem too good to be true probably are. The Mortgage Asset Research Institute reported that 26 states have "serious problems with mortgage fraud". Some tactics include pressuring home buyers to file quitclaim deeds; buying homes at low prices and re-selling them for profit through dishonest appraisals; and manipulating fees and penalties to re-classify performing loans as defaults.

When choosing who you'll do business with, be sure to select an established business with a good reputation. This doesn't necessarily mean that the largest lenders will give you the best terms; don't forget to look for local firms, too. Check them out online through the Better Business Bureau and Rip-off Report. Ask to speak with previous clients, or solicit opinions through online forums or classified ads. If you're very concerned, you can always hire a lawyer to represent your best interests.

Also, don't accept a variable-interest loan, or a mortgage with a low-interest introductory period. That period won't last forever, and your interest rates – and monthly payments – will likely soar when it's over. Look at how many homes have been foreclosed because buyers couldn't afford the payments after their interest reset at a higher rate. Carefully read everything you sign, and demand clarification for any vague or unspecified points. It wouldn't hurt to have an attorney look it over, too.

Finally, you should consider using a professional mortgage broker. As pros, they have the knowledge and resources to find great loans quickly and easily. Using a broker will cost you some up front money, but will save you time and stress.

We've all heard the myriad horror stories about families losing their homes, houses that were foreclosed and auctioned off for insultingly low prices. This should not scare you away from buying a home, but it should serve as a cautionary tale for anyone looking to secure a mortgage: take your time, and do your homework. If you get caught up in the dream of owning your own home, you're more prone to take the first good deal that comes along. Don't make yourself vulnerable to unscrupulous lenders. Instead, arm yourself with knowledge and keep your head about you. Taking your time to think things through could make all the difference.

About the Author:
This article has been provided courtesy of Destroy Debt, http://www.destroydebt.com/