Charge Off and Bankruptcy Basics for Consumers

If you are faced with insurmountable credit card debt, you may be contemplating a charge off or a bankruptcy filing. If you find yourself at this crossroads, here is the information you need to make a wise decision, and even avoid these two scenarios. What's the Difference?

Charge Off

A charge off is simply that the creditor has written off your debt because you are unable to pay for six months or more. However, you will be dealing with credit collections agencies for a lengthy period of time after the charge off. A charge off does not relieve you of the debt, it is just a way for the credit card company to get it off their books. You must pay this debt back to the collection agency that takes possession of the debt after it is charged off. The charge off and subsequent collections will be reported to credit bureaus for seven years and hurt your credit score. As a result, it may be nearly impossible for you to obtain credit and even some jobs until the charge off comes off your credit report.

Bankruptcy

There are several types of bankruptcies, but general rules apply to all. In a bankruptcy, you petition the federal bankruptcy court to absolve you of your debts. If the court agrees, your debts are either written off completely, or reduced to a manageable level that you pay back over a period of years. You may be forced to give up your assets in a bankruptcy. A bankruptcy judgment will also be reported to the credit bureaus, and negatively affect your ability to obtain further credit, and even hurt your chances at many jobs. Likewise, if you are a federal government employee or military member, you can lose your security clearance due to a bankruptcy. You also must pay filing fees and retain an attorney to represent you in bankruptcy court. This is very costly, and is a long, drawn-out process.

How Can You Avoid Bankruptcy or Charge Offs?

The best way to avoid a charge off or bankruptcy filing is to quite simply pay off your debts. This is sometimes easier said than done. If you can't pay your bills now, work out a plan to do so as soon as possible.

First, create a budget and account for every penny. Make a list of your debts, when they are due, and the name of the creditor. Give top priority to the bills that are overdue. Pay these bills first. After all of your bills are caught up, begin to pay off your bills from the smallest to the largest. This may take a period of years, but is completely possible.

While you are working your pay-off plan, look for ways to bring in extra funds. Sell some assets. Find a part-time job. Create a part-time job if the unemployment rates are high in your area. Pick one of your skills and market your services to the community. There are many ways to bring in extra funds, you just have to be creative and think outside the box.

Next, contact your creditors to work out payment arrangements for any debts you are behind on. Many creditors are more than willing to work with clients that are behind, if they are assured that you are trying to do the right thing and make restitution for your debt. Work with your creditor to create a payment plan and stick to it.And make payments every month. If you skip a payment, the creditor will consider you in default and take further legal action against you.

While you are working on paying back your debt, stop using any credit. Cut up your credit cards and cancel the accounts. Close any revolving credit lines. Pay for everything with cash. In addition, put aside a small emergency fund of $1,000. After you get all of your debt paid off, you can add to this. While you are working on paying off debt, a small emergency fund will be enough to keep you afloat for a short time in the face of an unforeseen emergency.

In Conclusion

A bankruptcy or charge off can sometimes be an unavoidable choice. If you are in dire financial straits and have to choose, make sure you weigh your options carefully before jumping into a decision. Seek the services of a financial counselor to help you. Many cities offer free financial counseling and assistance for citizens in need, so check out these programs. There is light at the end of the tunnel, you just have to persevere.

Ways To Conquer Debt

In today's economy, many Americans find themselves suffering from a large amount of debt. Many are struggling just to keep up with the minimum payments from their creditors. While there are several techniques that can be applied to conquer your debt, credit consolidation still stands as the quickest and most reliable method. There are many financial institutions that offer credit consolidation loans. What these types of loans do is group all your debts into a single loan, which is likely to carry a lower interest rate than your existing debt.

One of the first things that you need to do to conquer debt is to find out exactly what you owe. Many people overlook this simple rule. Determine how much your total debt is, then determine how much your monthly bills are. Include payments on your debt when you calculate your monthly bills.

The next step is to determine your discretionary income. The difference of income minus necessary expenses is your discretionary income. After you have done this, it is time to start making decisions. You have to figure out what you can afford to pay, and what you have to cut out. Things that are absolutely necessary should be at the top of the list, while things that are not should remain at the bottom.

Once you have established this prioritized list, stop adding on to your debt. You should start using cash at all times to pay for the things that you want. You don't have to close your credit card accounts, you just have to stop using the cards completely until you have paid your debt down. If you do close your credit card accounts, you stand a chance of negatively impacting your credit rating.

If you have a credit card and have only been making the minimum payment every month, then make sure that you start doubling up on your payments. When you only make the minimum payment, the interest rate has time to accumulate more over a period of time. You also want to try to pay more on cards that you have with higher interest rates. As a general rule, you should start off with any cards that have an interest rate of 10% or more. You also have the option of calling the credit card company and asking them to lower your interest rate. If they agree to drop your interest rate by even 5%, this could mean hundreds of dollars of instant savings.

If you have any extra income, put that towards your debt. People who are serious about ending their debt, tend to scrutinize their expenses. If you have any unnecessary expenses such as cigarettes, alcohol, lunch money, etc., cut down on it. You also want to keep track of your progress. Use a spreadsheet with your personal debt data on it, and update the spreadsheet every month. This will allow you to see exactly how much progress you are making toward your goals. It is also a good idea to get your credit report on an annual basis.

If you are sticking to your plans, then your credit rating should go up every year. Sometimes there is inaccurate information on your credit report, so make sure you address those issues as soon as possible. You should create an emergency fund by using a portion of your discretionary income. You should take somewhere between 5% to 10% of your income and allocate it towards your emergency fund. If you cannot afford to allocate that mush of your income to your emergency fund, just do what you can. If you put these principles into action immediately, you should be out of debt in no time.

Unemployment Student Loan Deferment Can Be a Financial Life Saver

Unemployed Graduates Can Delay Thier Student Loan Payments by Up to Six Months

It is no secret that the job market is extremely tough for new college graduates. Coupled with the fact that many have enormous amounts of student loans, college graduates are starting their adult life under back- breaking financial pressure. Luckily there is an option that can give graduates a little breathing room.

Unemployment student loan deferment is available to graduates who have not yet obtained a job after graduation. The deferment length can vary by bank and institution. According to Citibank, they offer a 6 month student loan deferment. Even if you obtain a job during the deferment period, you are still not obligated to begin repaying the loans until 6 months later. This option also has no bearing on your credit. The following requirements must be met to obtain a student loan deferment:

** Have an outstanding Federal Stafford, Supplemental, PLUS or Consolidation Loan.
** Be conscientiously seeking full-time employment in the U.S. in any field and at any salary or responsibility level.
** Be registered with a private or public employment agency if there is one within 50 miles of your permanent or temporary address.
** You will need to confirm your search for full-time employment during the preceding six months when applying for a continuation of an unemployment deferment.
** Re-apply every six months.
** If you obtained your FIRST loan on or after 7/1/1993, you are eligible for a maximum of three years of Unemployment Deferment.

Better Pay Off Any Accruing Interest

Even though you are granted 6 months free of student loan payments, it may be wise to at least pay off some of the accruing interest. Though your payments have been put on hold, your unsubsidized student loans will continue build up interest. In order to lower your interest payments, it is recommended you also consolidate your student loans and lengthening the repayment period. Graduate student loans can be lengthened up to 25 years. Of course you must consider that this means a higher total loan payment in the end. Consolidating and lengthening the repayment period can be done through the Federal government. Please check out DirectLoans.com for official information regarding the policies of student loan repayment plans.

Applying For Unemployment Deferment

In conclusion, unemployed college graduates with student loans should consider applying for an unemployment deferment. It is an extremely tough time for many in this country struggling with college loan payments. Hopefully this option will help get some people back on their feet. It is also important to try and consolidate your loans and lengthen the repayment period. Utilizing all three steps can go a long way toward easing the financial pain.

Budgeting for Student Loan Repayment After Graduation

As happy as I was to be finished with school, the excitement of graduating was dampened a bit by the knowledge that I'd soon be making hefty payments toward my student loans. While going to school was unquestionably worth it, paying back the money I borrowed took some careful planning and preparation. Here's how I went about transitioning from my "going to school" budget to paying down my student loan balance.

Planning Ahead

Before I borrowed a cent, I did my homework and looked into different types of loans and the repayment options they offered. I opted for a Federal Direct Loan, knowing that I'd have a six-month grace period after graduation before I'd have to start repayment. Since Direct Loans are funded by the government, the interest rates are fixed and very low, and borrowers can choose from a number of different repayment schedules and options. As I got close to graduation, I started adjusting my budget and making "fake loan payments" into my savings account, in preparation for writing the actual checks.

Preparing to Pay 

Presumably, the six months of deferred payments are designed to give graduates a chance to find a job and start making money before going into repayment status. Though I already had a job, that "cushion" of time gave me the chance to go over my budget and prepare to pay; most importantly, it allowed my post-graduation raise to go through with my employer, so the extra money in my paycheck helped to offset the new loan payment expense. During the "in between" time when I had my raise but wasn't yet paying, I never let myself spend or get used to that money; it went straight into the savings account, along with the money I'd been saving in preparation.

Choosing How to Pay

One thing I considered carefully was how to set up payments. I had the option to pay one set amount each month for the duration of the loan, or I could opt for the "graduated" system, with the payment amounts increasing incrementally over the years. I also have the ability to request partial or full forbearances, which can change the amount of my payment -- or suspend it entirely -- for a fixed length of time. I opted for the fixed monthly payments, because I didn't want to become accustomed to paying less than I'd have to down the road; as long as I can stand to make the payment, I want to fork over the money and get rid of the debt.

Starting Repayment

Since my interest was deferred until I began paying, I scraped together all the money I could to make a huge first-time payment. Because 100% of the initial payment went toward the principal of the loan, every cent paid reduced the interest I'll pay for the life of the loan. Since then, I've consistently made payments, including some extra ones here and there. When I relocated and switched jobs, I was able to get a six-month forbearance (though I paid the interest to keep it from compounding) while I situated myself in my new home.

How to Look For A Mortgage For People With Bad Credit

Since the economy having down turn 2 years ago, the bankruptcy rate has hit record high in many countries. Many people are facing difficulty in getting bad credit loan remortgage for their house as well. Luckily, there are still some bad credit lenders which provide mortgage for people with bad credit.

Mortgage For People With Bad Or Adverse Credit

Many loan lenders are not willing to mortgage for people with bad credit. Therefore, many bad credit borrowers are not able to get any loan either online or offline. If you want to apply for bad credit loan, before you doing so, it is advisable for you to keep reading for some tips about how to effectively reduce the interest fees in your bad credit loan remortgage in order to save you unnecessary wastage of thousands of dollars. The actual rate of interest applied on the poor credit loan remortgage can be inversely assist to raise your credit score. For applicant who has good credit history, the interest rate will be lesser while applying for mortgage loan. These charging money can risk their capital. As for borrowers, it can be said that by getting greater loan, they will feel satisfied with the requirements which are otherwise impossible. Hence, excessive interest rate for poor credit mortgage can be the win-win situation. Similarly, loan providers and borrowers can benefit from each other for these achievements.

Bad Credit Lenders That Mortgage For People With Bad Credit

For bad credit lenders, when they are consider to release mortgage for people with bad credit, normally they are going to check out the background of the borrower in the first place. For many people who wish to mortgage to buy a property, any reduced credit score background will makes sure that they could make use of a few overdue payments or having personal bankruptcy record in their current period. However, for the purposes of any bad credit loan remortgage, which means the bad credit score history can be extremely specific. Generally, it includes at least a few of the following:. - Default on previous house or even automobile loan. - Some late payment notations, either credit cards or some other obligations. - Personal bankruptcy

How to Proceed When You Want to Apply For Mortgage For People With Bad Credit?

If a person would be interested in apply for mortgage for people with bad credit, the best thing to do is to talk to an expert mortgage broker who is specialize in providing advice with consider to poor credit mortgages. Nonetheless, always make sure that the actual mortgage broker has the necessary financial skilled and able to manage the mortgage policies.

Least Expensive Mortgage Rates

If you are on your way looking for inexpensive homes, you have to make sure it's got guarantee by the past proprietor. By doing this, it will be easier for you to take over the remaining mortgage for the home. Excessive equity with the home is usually equal to putting a substantial advance payment for purchasing the home which usually increases the actual bad credit loan remortgage to price ratio if your bad credit lenders have decided to approve your mortgage. Finally, if you apply for mortgage for people with bad credit, you could be discouraging by many possible property owner, it is possible to locate a bad credit lenders who provide bad credit remortgage that actually works on possible credit rating issues . One of the best options for many people would be to check out federal government financial loans which can be guaranteed from the federal that offering mortgage for people with bad credit.

Government Shutdown Hampers Housing Application

This past week, the federal government faced its first partial shutdown as Congress was unable to come to an agreement and nearly all federal agencies were forced into some form of slowdown or furlough. For the housing market, this partial shutdown may have a more dramatic effect, however it is unlikely to bring the housing market to a halt. Primarily, the impact should be little more than adding a slight delay – a few days on a process that takes many weeks, if not months, to finalize.
While it may seem like the impact is dramatic, in reality it is not halting or damaging home buyers as of yet, but may be an inconvenience as the process is slightly related.

Who Is Impacted?

Anyone going through the process of applying for a loan may face a delay because of the limited functions of the IRS. Any tax related or proof of income documents must be obtained through the IRS, which is facing a slowdown and many employees have been put on furlough. For those well into the mortgage obtainment process, you may have already passed this step and as such will not be effected.

For those who are mid-purchase, there may be a delay in the process. However, since there are many steps to obtaining a mortgage that can run concurrent or in different order, your broker may be able to greatly reduce the impact of the shutdown on your mortgage.

If you are looking to buy a home but have not started the process, there is no reason to hesitate. While your application might begin at a slower pace than usual, there will likely be no overall impact on your application or your chances of securing a new home. Mortgage brokers are still able to help start the process and may be able to get your application all the way through so that by the time documents are requested from the IRS, the impact of the shutdown will be long over.

Will The Shutdown Terminate My Application?

At the moment, there is no sign of this happening, nor is it likely to happen in the future. Banks and investment firms are well aware that the shutdown is a temporary situation and acting rashly will do nothing bet send the market into upheaval. And, as eager as you are to purchase your home, the banks and investment companies are equally as eager to have you as clients and customers.

Will the Shutdown Affect the Market?


While the future is technically anyone’s guess, the market should not be impacted in the long run over the shutdown. While the shutdown is in effect and for a short period following a full reinstatement of employees, the market may be sluggish as brokers and lenders attempt to clear up any and all pending applications. Once the backlog is cleared, the market should remain open and as vigorous as it has been prior to the temporary shutdown

Making Homes Affordable (MHA) FAQs

Since March of this year, qualified homeowners have been able to renegotiate the terms of their mortgages through the Making Homes Affordable plan (MHA), a federally-subsidized program designed to check the foreclosure freefall by helping homeowners meet their monthly payments.
Not everyone will qualify, but for those who do—and the government’s hoping that 3 to 4 million do—$75 billion has been set aside to fund the program (and to provide banks a monetary incentive, good news for the borrower).

Here are some frequently asked questions to help you navigate this…

1. What is a loan modification?
This is a change in one or more of the terms of a home loan. Generally speaking, it allows the reinstatement of the loan and provides lower monthly payments. You may also hear it referred to as a mortgage modification, restructuring, or workout plan. Under Obama’s plan, the goal is to help the borrower reduce monthly payments to 31% of monthly income or lower.

2. How do I qualify?
The short answer is that you’ll need to show that modification will make the difference between your keeping the home and losing it. So you’ll need to prove financial hardship—loss of income and/or increase in expenses due to job loss or relocation, divorce or separation, death of spouse or other, illness, or even military service; and you’ll need to prove responsibility–proof of income, and a complete and accurate disclosure of your financial statement.

3. What are the restrictions?
Here are a few: Only those living in the home on which the loan is being paid are eligible. Mortgages on second homes, investment properties, commercial properties, and vacation homes are ineligible. The mortgage must have originated prior to 2009 and be no more than $729,750.

4. What is the procedure?
The bank will look at your monthly income and monthly loan payment. Under the MHA, borrowers can lower their payments to less than 31% of income. One or more of the loan’s terms may be adjusted to meet this. The new mortgage payment will then be in effect for five years.

5. Do I have to be currently delinquent on my payments to get a loan modification?
Not necessarily. One of the goals of the program is to help borrowers before they get into trouble. To that end there’s a provision and incentive which allows lenders to reach out to those homeowners who are not yet delinquent but deemed at risk.

6. Will a loan modification help me stop foreclosure?
Yes, it will. And that’s the program’s main goal. You’ll work with your lender to find a payment solution that halts the foreclosure and/or reinstates the loan.

7. Can my missed payments be added back into my new loan modification?
Yes. Arrears can be rolled into the new loan balance, making it current.

8. Can I do a loan modification myself or should I pay someone to represent me?
Before the MHA program came along the burden of getting a loan modified was largely on the borrower’s shoulders. But incentives for the lenders to get involved are making that less so. Still, it’s not a simple process. For what it’s worth, the Treasury Department is discouraging third-party, fee-based representatives. But the decision is yours. Either way, learn the process (you’re starting that now), think like a bank when putting together your materials, and know your legal rights.

9. How long will the MHA program be available?
Through the end of 2012.

10. So how do I get started?

Be informed, learn all you can, then contact your lender’s loss-mitigation department.